Too Early To Comment On Skilled Healthcare : JP Morgan

Analysts at JP Morgan maintain their "neutral" rating on Skilled Healthcare Group SKH. SKH’s shares have fallen more than 65% over the past week. According to JP Morgan, “California jury verdict against the company, which awarded plaintiffs a total of $671mm in damages. There are several possible and probable outcomes ranging from a complete reversal of the ruling to a settlement of some form to a forced bankruptcy of the company. At this point it is just too early to call, with compelling arguments to be made on all sides. In addition, we have included California Office of Statewide Health Planning and Development (OSHPD) data that show that many of the company’s facilities ran nursing levels below the regulatory requirements as well as CA sector averages.” “The first big hurdle for SKH is the final judgment, which could change/reduce many of the key variables with the most critical being the ability to change the bonding requirements for an appeal from 150% of the final judgment amount (approx $1.0bn). Given the liquidity and solvency constraints on the company we believe the courts will lower the bonding requirements and allow an appeal, thus lowering the immediate threat of bankruptcy. Important to the appeal process will be that in an earlier case the courts found nursing requirements to be a regulatory issue rather than one for the courts. On a reversal the stock would likely jump back/near to pre-judgment levels, otherwise an appeal would raise the probability for settlement and/or other alternatives,” the analysts say. More Analyst Ratings here.