Judge OKs Steward Seeking New Lenders, Extends Timeline for Selling Hospitals

YOUNGSTOWN, Ohio – U.S. Judge Christopher Lopez listened to arguments and testimony for nearly two hours Monday, then quickly ruled in favor of creating a “competitive bidding environment” for Steward Health Care System’s 31 hospitals and network of 6,000 physicians.

“Everybody has to put their cards on the table really fast,” he said.

“Everybody needs to be focused. These are not warehouses. … They’re important hospitals with real people saving lives.”

At issue was Steward’s need for $225 million in debtor-in-possession (DIP) financing “by no later than the week ending June 14,” according to an emergency motion filed Friday.

The company sought court approval to solicit bids from third parties that would guarantee the lender offering the best financing proposal a commitment fee of $6.75 million, $250,000 in expenses and be first in line – or “primed” – to be repaid before all other lien holders.

The motion was opposed by the so-called FILO lenders who hold first liens. Their attorney, Samir L. Vora, argued that Steward manipulated the court schedule by abruptly canceling a scheduled deposition May 30 with the chief restructuring officer retained by Steward. Instead, it filed – long after the close of business Friday – an unexpected emergency motion to be heard yesterday.

“There’s no reason why this needs to go forward today,” Vora said. Steward has “cash through the rest of the week at least. … The FILO lenders offered them a $25 million DIP facility … that would provide them enough runway” to continue soliciting bids.

Countered the chief restructuring officer for Lazard Freres & Co., Tyler W. Cowan, the $25 million offer, not received until Monday morning, is a “band-aid that sends a terrible message to the market, our stakeholders … and all the parties we’re working with for a $225 million DIP,” he said, and to sell Steward’s assets.

“From my perspective, these [existing] stakeholders have had plenty of time to step up and provide a proposal [for the $225 million Steward needs],” he said.

Lopez agreed. “Whatever is the best financing available … this is what is going to create a robust competitive process [to sell the assets]. I’m all for it,” he said.

According to Cowan, four lenders are interested in lending Steward $225 million DIP financing. But they would not move forward absent the commitment fee and paid expenses – for fear the company’s lien holders and asset-based lenders would “leave them at the altar.”

Monday’s hearing was scheduled weeks ago on Steward’s proposed bid, auction and sale deadlines for its hospitals and physician network. That motion was quickly dispatched by Lopez, with no parties objecting after consensual extensions to auction and final sale hearing dates.

Among the 31 hospitals Steward operates in eight states are Trumbull Regional Medical Center in Warren, Hillside Rehabilitation Hospital in Howland and Sharon Regional Hospital in Sharon, Pa. The bid deadline for the local hospitals and certain hospitals in five other states remains June 24. A hearing on any sale proposals received is now scheduled for July 11.

For its hospitals in Florida, the bid deadline remains July 27, the auctions July 30 and sale hearing Aug. 5, should Steward’s motion be approved.

“I appreciate the parties worked together to reach resolution on procedures and process,” Lopez said. “We’re not picking a winner today. We’re picking a process.”

Copyright 2024 The Business Journal, Youngstown, Ohio.