HealthSouth (HLSH.OB) Potential Spinoff

HealthSouth has announced plans to divest it's surgery and outpatient rehab centers. The outpatient division is quite small in comparison to the parent, from the article:

In the three-month period ended June 30, HealthSouth said that among its four primary operating divisions, surgery accounted for 24.5% of revenue and 18.1% of operating earnings; its outpatient division contributed 11% of revenue and 6.8 % of operating earnings

Another article provides comments on the form that the divestiture might take:

Chief executive Jay Grinney said HealthSouth is considered alternatives including a spinoff or sale of its underperforming divisions.

The company has clearly stated that they will use the proceeds to pay off debt. In the case of a spinoff this would likely mean the spun-off division would take on a large debt load and pay it back to the company in the form of a tax-free dividend. High-debt can exacerbate institutional selling in the case of a spinoff. On the flip-side, HealthSouth is relatively small at $1.8 Billion and is not part of the S&P 500 which will limit the amount of selling when and if a spinoff occurs. In spite of this, the story is worth watching.