Sun Healthcare

      Irvine, Calif. (Oct. 19, 2006) - Sun Healthcare Group, Inc. (NASDAQ: SUNH) and Harborside Healthcare Corporation, a leading nursing and long-term care company, today announced that Sun has agreed to acquire Harborside from Investcorp, a leading global alternative investment manager. Sun has agreed to pay approximately $350 million in cash for all of Harborside’s outstanding stock and to refinance or assume Harborside’s net debt of approximately $275 million (which includes indebtedness to be incurred to purchase, prior to closing, certain facilities that are currently leased by Harborside). Sun anticipates that the transaction will result in annual net synergies of approximately $12 million to $15 million and that it will be accretive to Sun’s earnings per share in 2007.
      Boston-based Harborside operates 76 facilities, of which 53 are owned (including facilities for which purchase options are being exercised), in 10 eastern states that are all overlapping with or contiguous to states in which Sun already has operations. Harborside has approximately 9,265 employees serving more than 8,300 residents and patients on a daily basis (91 percent of operating beds). Harborside also offers temporary medical staffing, home care, hospice and nurse practitioner services. For the twelve months ended June 30, 2006, Harborside had revenues of approximately $544 million, which does not include additional revenues of approximately $91 million giving full-year effect for that twelve month period for acquisitions which have occurred or will occur in 2006.
      Sun has received debt financing commitments from Credit Suisse and CIBC World Markets Corp. to fund the purchase price and refinancing of certain Harborside and Sun debt.
      The transaction is expected to close in the first half of 2007, subject to certain closing conditions that include regulatory and other approvals.
      "Sun’s acquisition of Harborside will be a transforming event for Sun, creating one of the nation’s premier long-term care operators. I have known the Harborside management team for a number of years and am quite familiar with their operational philosophy and their fine reputation. Their focus on quality and higher-acuity patients lines up perfectly with Sun’s initiatives," said Richard K. Matros, Sun’s chairman and chief executive officer. "This transaction will achieve a number of our goals, including, importantly, an increase in the number of owned properties in our portfolio from 30 to 83, raising the percent of our owned portfolio from 19 percent to 36 percent." Matros continued, "We are pleased with the success we’ve had with the integration of Peak and the expected synergies. That acquisition and our subsequent execution of it have created a strong base with which to integrate Harborside." Matros and the Sun senior management team will continue in their current roles in the combined organization.
      "We look forward to joining the Sun Healthcare Group family as it continues to distinguish itself as one of the nation’s top healthcare providers," stated Damian N. Dell’Anno, president and chief executive officer of Harborside Healthcare. "We are proud of the significant growth we have achieved over the past several years while providing superior care for our patients," continued Dell’Anno.

Conference Call
      Sun’s senior management team will hold a conference call to discuss the acquisition on Friday, Oct. 20, 2006, at 1 p.m. EDT/10 a.m. PDT. To listen to the conference call, dial (877) 516-8526 and refer to Sun Healthcare Group. A recording of the call will be available from 4 p.m. EDT on Oct. 20 until midnight EDT on Oct. 27 by calling (800) 642-1687 and using access code 9097748.

About Sun Healthcare Group, Inc.
      Sun Healthcare Group, Inc., with executive offices located in Irvine, California, owns SunBridge Healthcare Corporation and other affiliated companies that operate long-term and postacute care facilities in many states. In addition, the Sun Healthcare Group family of companies provides therapy through SunDance Rehabilitation Corporation, medical staffing through CareerStaff Unlimited, Inc., home care through SunPlus Home Health Services, Inc. and hospice services through Preferred Hospice.

      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," and similar expressions. 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, including the impact of the Deficit Reduction Act and regulations implementing it; the possible failure to occur of the conditions necessary to closing of the Harborside Healthcare Corporation transaction; potential liability for losses not covered by, or in excess of, Sun’s insurance; the effects of government regulations and investigations; the Company’s ability to generate cash flow sufficient to operate the business; Sun’s ability to identify, complete and integrate future acquisitions; increasing labor costs and the shortage of qualified healthcare personnel; and loss of key management personnel. More information on factors that could affect Sun’s business and financial results are included in the public filings made with the Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, a copy of which is available on Sun’s web site, www.sunh.com.
      The forward-looking statements involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond Sun’s control. The Company cautions investors that any forward-looking statements made by Sun are not guarantees of future performance. Sun disclaims 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.
      Any documents filed by Sun with the SEC may be obtained 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. You may also read and copy any reports, statements and other information filed by Sun with the SEC at the SEC public reference room at Room 1580, 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at (800) SEC-0330 or visit the SEC’s web site for further information on its public reference room.

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