LifeCare Holdings, Inc. Announces Third Quart...(tember 30 2007 for financial covenant te...),Health

Liquidity and Capital Resources

At September 30, 2007, our outstanding indebtedness consisted of $147.0 million aggregate principal amount of senior subordinated notes, a $249.9 million term loan facility with a maturity of seven years, and capital lease obligations of $3.0 million with varying maturities.

The senior secured credit facility requires us to comply on a quarterly basis with certain financial covenants, including an interest coverage ratio test and a maximum leverage ratio test, which will become more restrictive over time. In addition, the senior secured credit facility includes various negative covenants, including limitations on indebtedness, liens, investments, permitted businesses, restricted payments, transactions with affiliates and other matters, as well as certain customary representations and warranties, affirmative covenants and events of default including payment defaults, breach of representations and warranties, covenant defaults, cross defaults to certain indebtedness, certain events of bankruptcy, certain events under ERISA, material judgments, actual or asserted failure of any guaranty or security document supporting the senior secured credit facility to be in full force and effect, change of control, and certain other provisions.

On May 2, 2007, we entered into Amendment No. 1 for the senior secured credit facility ("Amendment No. 1"). Amendment No. 1 modified certain financial covenants effective March 31, 2007 and increased the spread on the variable interest rate to be paid by the Company. Based upon amounts presently outstanding under the senior secured credit facility and current interest rates, Amendment No. 1 will result in an increase in annual interest
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