Sun Healthcare Group, Inc. Announces Proposed Refinancing

IRVINE, CA–(Marketwire – September 23, 2010) –  Sun Healthcare Group, Inc. (NASDAQ: SUNH) (“Sun”) announced today that it intends to refinance its existing senior secured credit facilities with borrowings under a new senior secured credit facility to be entered into by SHG Services, Inc., a subsidiary of Sun (“SHG”). The new senior secured facility is expected to include a $60 million revolving credit facility, a $150 million term loan and a $75 million funded letter of credit facility. The refinancing, which is being undertaken in connection with Sun’s previously announced restructuring, is subject to market and other conditions, and there can be no assurances that these transactions will be consummated.

About Sun Healthcare Group, Inc.

Sun’s subsidiaries provide nursing, rehabilitative and related specialty healthcare services principally to the senior population in the United States. Sun’s core business is providing, through its subsidiaries, inpatient services, primarily through 166 skilled nursing centers, 16 combined skilled nursing, assisted and independent living centers, 10 assisted living centers, two independent living centers and eight mental health centers. On a consolidated basis, Sun has annual revenues of $1.9 billion and approximately 30,000 employees in 46 states. At June 30, 2010, SunBridge centers had 23,209 licensed beds located in 25 states, of which 22,427 were available for occupancy. Sun also provides rehabilitation therapy services to affiliated and non-affiliated centers through its SunDance subsidiary, medical staffing services through its CareerStaff Unlimited subsidiary and hospice services through its SolAmor subsidiary.

In May 2010, Sun announced a plan to restructure its business by separating its real estate assets and its operating assets into two separate publicly traded companies through a series of internal restructurings (the “Restructuring”), subject to the approval of stockholders and other conditions. In connection with the Restructuring, SHG will own and continue to operate all of Sun’s operating subsidiaries, with stockholders of Sun receiving a pro rata distribution of the stock of SHG (the “Separation”). Substantially all of Sun’s currently-owned real estate assets will be owned by Sabra Health Care REIT, Inc., a subsidiary of Sun (“Sabra”) and, immediately after the Separation, Sun will merge into Sabra. Following this merger, SHG will change its name to Sun Healthcare Group, Inc. The common stock of both companies is expected to trade on the NASDAQ Global Select Market. The Restructuring (including the Separation) is expected to be completed in the fourth quarter of 2010.

Forward-Looking Statement

Statements made in this release that are not historical facts are “forward-looking” statements (as defined in the Private Securities Litigation Reform Act of 1995) that involve risks and uncertainties and are subject to change at any time. These forward-looking statements may include, but are not limited to, statements containing words such as “anticipate,” “believe,” “plan,” “estimate,” “expect,” “hope,” “intend,” “may” and similar expressions. Forward-looking statements in this release include all statements regarding our expected future financial position and results of operations, business strategy, the impact of reductions in reimbursements and other changes in government reimbursement programs, the timing and impact of the Separation and transactions related thereto, growth opportunities and plans and objectives of management for future operations. Factors that could cause actual results to differ are identified in the public filings made by Sun with the Securities and Exchange Commission and include changes in Medicare and Medicaid reimbursements; the impact that any healthcare reform legislation will have on our business; our ability to maintain the occupancy rates and payor mix at our healthcare centers; potential liability for losses not covered by, or in excess of, our insurance; the effects of government regulations and investigations; the significant amount of our indebtedness, covenants in our debt agreements that may restrict our activities and our ability to make acquisitions, to incur more indebtedness and to refinance indebtedness on favorable terms; our ability to accomplish the Separation and the transactions related thereto, the impact of the current economic downturn on our business; increasing labor costs and the shortage of qualified healthcare personnel; and our ability to receive increases in reimbursement rates from government payors to cover increased costs. More information on factors that could affect our business and financial results are included in our public filings made with the Securities and Exchange Commission, including our Annual Report on Forms 10-K and Quarterly Reports on Form 10-Q, copies of which are available on Sun’s web site, www.sunh.com. There may be additional risks of which we are presently unaware or that we currently deem immaterial.

The forward-looking statements involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond our control. We caution investors that any forward-looking statements made by Sun are not guarantees of future performance and are only made as of the date of this release. We disclaim any obligation to update any such factors or to announce publicly the results of any revisions to any of the forward-looking statements to reflect future events or developments.

Additional Information

In connection with the Separation, SHG has filed with the SEC a Registration Statement on Form S-1 and Sabra has filed with the SEC a Registration Statement on Form S-4, each containing an identical proxy statement/prospectus. The definitive proxy statement/prospectus will be mailed to Sun stockholders. Before making any voting or investment decision, Sun stockholders and investors are urged to read the proxy statement/prospectus and other documents filed with the SEC carefully and in their entirety when they become available because they will contain important information about the proposed transactions. Stockholders will be able to obtain these documents free of charge at the SEC’s web site at www.sec.gov. In addition, investors and stockholders of Sun may obtain free copies of the documents filed with the SEC by contacting Sun’s investor relations department at (505) 468-2341 (TDD users, please call (505) 468-4458) or by sending a written request to Investor Relations, Sun Healthcare Group, Inc. 101 Sun Avenue N.E., Albuquerque, N.M. 87109.

Sun and its directors and executive officers and other members of its management and employees may be deemed to be participants in the solicitation of proxies from the stockholders of Sun in connection with the transactions described in this release. Information about the directors and executive officers of Sun and their ownership of shares of Sun common stock are set forth in the Annual Report on Form 10-K for the year ended December 31, 2009, filed with the SEC on March 5, 2010, and in the definitive proxy statement relating to Sun’s 2010 Annual Meeting of Stockholders filed with the SEC on April 30, 2010. These documents can be obtained free of charge from the sources indicated above. Additional information regarding the interests of these participants will also be included in the definitive proxy statement/prospectus when it becomes available.