On Monday, Steward Health Care System LLC filed for bankruptcy in the Southern District Court of Texas as it finalizes a rescue loan with its landlord, Medical Properties Trust Inc. The Massachusetts-based firm listed assets and liabilities ranging from $1 billion to $10 billion and sought Chapter 11 protection.
Despite operating 33 community hospitals in nine US states with more than 30,000 employees, Steward Health has been struggling with its liquidity in recent months. As part of the restructuring deal, Medical Properties is set to provide initial debtor-in-possession funding of $75 million and an additional loan of up to $225 million if certain conditions are met. In January, Medical Properties provided Steward Health with a $60 million bridge loan and deferred some of its rent arrears.
The bankruptcy petition allows Steward Health to keep operating while it seeks approval for a restructuring plan. However, the company’s CEO cited higher costs and “insufficient reimbursement by government payors” among the factors leading to the Chapter 11 filing. The delay in the sale of its physician business unit forced it to look for an alternative source of funding.
Medical Properties fell 18% in premarket trading to $4 as of 6:30 a.m., New York time. The CEO stated that this process will enable Steward Health to responsibly transition ownership of its Massachusetts-based hospitals while keeping all hospitals open to treat patients and ensuring continued care and service for their communities. The case number is Steward Health Care Holdings LLC, 24-90212, US Bankruptcy Court for the Southern District Court of Texas.