Steward Says MPT Is ‘Undermining’ Bids; Landlord Responds
YOUNGSTOWN, Ohio – Steward Health Care System – now managed by a transition committee that excludes executives who signed the real estate deals under criminal investigation in multiple jurisdictions – is accusing its landlord of “undermining” and “interfering with” efforts to sell its hospitals.
Moreover, Steward now admits that its leases with Medical Properties Trust of Alabama are “expensive and burdensome, with significantly above-market rental obligations … [that] have crippled operations for years.”
Since 2022, Steward has paid MPT $870 million in lease payments, “even after accounting for certain rent concessions MPT provided in prepetition and debtor-in-possession financing, court papers say.
In a motion filed in U.S. Bankruptcy Court in Houston, the company says the process of selling its 31 hospitals “has been challenged by the self-interested involvement” of MPT.
Unless and until the leases are rejected, “MPT’s undermining behavior and brinkmanship jeopardizes the future of dozens of hospitals, tens of thousands of jobs, and the safety of patients.”
The motion seeks to reject, as of Aug. 16, MPT leases associated with the local hospitals Steward operates: Trumbull Regional Medical Center in Warren, Hillside Rehabilitation Hospital in Howland and Sharon Regional Medical Center in Sharon, Pa.
In all, court papers list 144 leases covering the area hospitals’ real estate, as well as hospitals elsewhere for which Steward has not received an “actionable” purchase bid.
Steward says MPT is demanding that hospital buyers obtain its consent to sever the leases or sign a new lease. And MTP “has imposed daunting requirements on potential hospital buyers,” demanding that bidders “allocate all the value of their bids to MPT’s real estate,” leaving little money to pay creditors.
The Official Unsecured Creditors’ Committee intends to assert “a number of claims and causes of action against MPT,” according to the motion, so that Steward’s landlord would not get preferential payments and instead would have to file claims like unsecured creditors.
Steward is asking the court to tell future bidders they must combine the value of each hospital’s operations and real estate when putting forth a total enterprise value. Sale proceeds would then be “placed into escrow pending a determination by the court regarding allocation of value between MPT and Steward’s estates.”
Steward says it also plans to file an adversary proceeding that asks the court to determine the value of the hospitals’ assets underlying the leases.
MPT Responds
In response to Steward’s motion, MPT issued this statement:
“Throughout this bankruptcy process, MPT has been collaborative and accommodating to help ensure Steward’s hospitals can remain open. We categorically reject any accusation that MPT has interfered with Steward’s marketing and sales efforts – on the contrary, we have proactively worked with potential bidders to address real estate-related matters. Steward’s lawyers are wrongly blaming MPT for holding up sales when in fact Steward has refused to sell hospitals in order to extract value from MPT. The rent that Steward agreed to pay in the leases with MPT is a small fraction of Steward’s revenues, and in fact is dwarfed by the fees being charged by the professionals in this bankruptcy case. Despite Steward’s recent attempts to rewrite history, their own statements at the outset of the bankruptcy process make clear their financial stress is a product of their own operating failures – not rent obligations.”
As of this posting, MPT has not filed an official response with bankruptcy court.
A hearing before U.S. Judge Christopher Lopez is set for Thursday on the proposed sale of hospitals in Arkansas, Louisiana and Massachusetts.
Steward has not identified any “qualified” bids for the local hospitals. A group has formed in Warren in hopes of saving Trumbull Regional Medical Center. Likewise, the operators of Meadville Medical Center in Meadville, Pa., say they would like to operate Sharon Regional if investors can be found.
Copyright 2024 The Business Journal, Youngstown, Ohio.
