Steward Health Care System LLC filed for bankruptcy on Monday as it finalizes a rescue loan with its landlord, Medical Properties Trust Inc. The Massachusetts-based firm sought Chapter 11 protection in the Southern District Court of Texas and listed assets and liabilities of $1 billion to $10 billion. Steward Health will keep operating while it seeks approval for a restructuring plan.
The company, which operates 33 community hospitals in nine US states with over 30,000 employees, 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 debt 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.
Medical Properties fell 18% in premarket trading to $4 as of 6:30 a.m. New York time. Steward Health’s Chief Executive Officer 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.
In the bankruptcy process, “Steward will be better positioned to responsibly transition ownership of its Massachusetts-based hospitals, keep all of its hospitals open to treat patients, and ensure the continued care and service of our patients and our communities,” the CEO said. The case is Steward Health Care Holdings LLC, 24-90212, US Bankruptcy Court for the Southern District Court of Texas.
