Entities Eye Steward’s Local Hospitals, ‘a Number’ Interested

YOUNGSTOWN, Ohio – The investment banking company hired to market Steward Health Care’s hospitals in Ohio and Pennsylvania has received indications of interest “from a number of buyers for some or all of the debtors’ assets.”

But no further information, specifically what that “number” is and if bids are likely, has been provided to the U.S. Bankruptcy Court in Houston, where the Chapter 11 bankruptcy case is being heard.

Steward Health Care System LLC operates Trumbull Regional Medical Center in Warren, Hillside Rehabilitation Hospital in Howland and Sharon Regional Hospital in Sharon, Pa.

According to a declaration filed Monday by James Moloney, managing director of Cain Brothers, “Beginning in late January 2024, Cain Brothers initiated buyer outreach and contacted 71 parties with marketing materials to gauge potential interest in purchasing Steward’s hospital assets located in Ohio and Pennsylvania. Thirty-four of these parties signed nondisclosure agreements (NDAs) and received access to diligence materials.”

Cain Brothers, a division of Cleveland-based KeyBanc Capital Markets Inc., was retained by Steward in January. It is also seeking bids for four hospitals in Arizona, one in Arkansas and Louisiana, three in southern Massachusetts and five in Texas.

The process to sell these hospitals appears to be further along.

Several indications of interest (IOIs) have been received for the assets in Arkansas and Louisiana. “Multiple parties are actively completing due diligence and evaluating bids for the Arizona assets,” Moloney’s declaration states.

As for Steward’s four Texas hospitals, “a number of potential bidders are active … and are evaluating bids for these hospitals.”

The solicitation of 45 parties to gauge interest in Steward’s three hospitals in southern Massachusetts resulted in 20 NDAs and, like the local hospitals, an unspecified “number” of IOIs. But the declaration elaborates that these IOIs “describe the proposed transaction structure and range of value for some or all of the [hospitals].”

A second investment banking firm, New York-based Leerink Partners, was retained by Steward in November to solicit bids for its eight hospitals in Florida and four in northern Massachusetts.

For the Florida hospitals, Leerink Partners “has contacted 58 parties, including 12 for-profit hospital systems. … Twenty-one parties signed NDAs and received diligence materials,” according to the declaration filed Sunday by Toby King, senior managing director in investment banking at Leerink Partners.

For the four northern Massachusetts hospitals, Leerink contacted 40 potential buyers, including 25 nonprofit hospitals. Thirteen have signed NDAs. Meanwhile, discussions are underway with the commonwealth of Massachusetts to secure financial support that would enable these hospitals to continue to operate, King’s declaration states.

Steward Health is also selling its Stewardship Health subsidiary, the largest network of primary care physicians and medical specialists in the nation. Forty potential buyers of the network were contacted, “17 entities then executed confidentiality agreements. … Ultimately four parties submitted non-binding indications of interest [IOIs],” the document states.

Leerink Partners evaluated these IOIs and determined the “the highest and best” submission was from Optum Inc., a subsidiary of United Health Group. Subsequent negotiations led to a proposal of terms and a premerger antitrust notification filed with federal regulators. That review is pending, preventing the execution of a stalking horse agreement, and Steward “remain[s] engaged with other bidders as well as United,” King states.

The investment bankers’ declarations were filed in support of Steward’s motion to establish bidding procedures, authorize stalking horse bidders and schedule auctions and sale hearings.

The motion is scheduled to go before U.S. Judge Christopher M. Lopez on June 3.

Steward Health Care filed Chapter 11 on May 6, reporting $9 billion in debt and $6 million in revenue. In addition to its 4,500-person physician network, the Boston-based company operates 31 hospitals across eight states, as well as 400 medical offices. It employs 30,000.

Copyright 2024 The Business Journal, Youngstown, Ohio.