Steward Health Care Moves Forward After Major Hospital Sales
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Steward Health Care Sells Hospitals Amid Challenges
Steward Health Care has navigated through turbulent waters, gaining court approval to sell six of its hospitals in a recent heated hearing. These sales netted the health care system an aggregate price of $243 million, allowing it to exit operations in the state and tackle its financial challenges.
The health system will transfer St. Anne’s Hospital and Morton Hospital to Rhode Island's Lifespan Health System for $175 million. Further, St. Elizabeth’s Medical Center and Good Samaritan Medical Center will go to Boston Medical Center for $140 million, while Lawrence General Hospital acquires both Holy Family Hospital campuses for $28 million. These strategic sales aim to provide an essential lifeline amid ongoing financial difficulties.
Financial Impact of Hospital Sales
Despite the sale's apparent success, the situation casts a long shadow over the future of Steward Health Care. According to Candace Arthur, a partner at Weil, Gotshal & Manges, the transactions will ultimately leave Steward about $17 million deeper in financial trouble after factoring in purchase price adjustments and closing costs.
Apollo Global Management, a private equity and asset management firm, emerges as a significant player in these transactions, netting approximately $225 million. The firm now controls the mortgages tied to these hospitals, which are owned by Medical Properties Trust and Macquarie Infrastructure Partners. The complicated discussions surrounding these deals illustrated the depth of the financial strains faced by Steward, particularly in allocating sales proceeds amongst various operational and real estate concerns.
Legal and Operational Challenges
Steward Health Care continues to face scrutiny from its lenders. The organization’s FILO lenders, including WhiteHawk Finance and Brigade Capital, have raised objections to the sale, arguing that selling the hospitals at a loss undermines their security interests. Throughout the restructuring process, these lenders have contributed about $575 million in operational funds, indicating the significant dependency of Steward on these financial backers.
In court, the lenders’ attorney, Michael Price, expressed concern over the collateral agreements, which tied hospital assets to their financing. He noted that the proposed deals do not adequately compensate secured lenders for their interests, raising issues about the true value being brought back to the estate.
Looking Ahead in the Healthcare Landscape
U.S. Bankruptcy Judge Christopher Lopez approved the hospital sales, citing them as the best option available under the circumstances. However, he retained about $17 million from the deal until a further determination of the allocation of these proceeds is made.
Steward must finalize these transactions by the end of September, and the entire process requires ongoing state and regulatory reviews. It’s a tight timeline, but the potential benefits of these sales extend beyond just financial recovery; they are crucial for preserving jobs and maintaining operational integrity in local healthcare.
CEO's Noncompliance with Subpoena
Amid these developments, Steward’s CEO, Ralph de la Torre, has drawn attention for his choice not to testify before a Senate committee regarding his role in the organization’s financial affairs. This defiance has sparked widespread criticism, especially from committee chair Sen. Bernie Sanders, who emphasized the need for accountability.
Steward Health Care chose not to comment on this matter, but the implications of such decisions can ripple through the organization’s reputation and further complicate its restructuring efforts. Senators have deemed the executive’s absence from the hearing as an outrage, threatening to hold him in contempt should he fail to testify.
Future Sales and Restructuring Plans
Looking forward, Steward has plans to conduct a sale hearing for its Florida hospitals, with expectations that this new transaction will bolster its financial standing significantly. Unlike the Massachusetts deal, this upcoming transaction with Orlando Health aims to preserve value that the health system can use to pay lenders and creditors alike.
As the restructuring story unfolds, additional developments surrounding future sales in Ohio and other regions indicate that the health system remains in a complex negotiation phase, highlighting the ongoing challenges it faces.
Frequently Asked Questions
What did Steward Health Care recently achieve?
Steward Health Care received court approval to sell six hospitals for $243 million, marking a significant step in their financial restructuring.
Why does the sale leave Steward in a deficit?
After adjusting for purchase price changes and closing costs, the hospital sales could leave Steward approximately $17 million further in the hole.
What role does Apollo Global Management play in these transactions?
Apollo Global Management is set to net around $225 million from the hospital sales, handling mortgages tied to Steward's Massachusetts facilities.
How are lenders reacting to the sale?
FILO lenders are objecting to the sale of the hospitals at a loss, arguing it jeopardizes their security interests in the company.
What are the next steps for Steward Health Care?
Steward must finalize its hospital sales by the end of September, while also preparing for additional hearings regarding other facilities in Florida and Ohio.
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