Bankrupt Steward Health sues landlord over stymied hospital sales
Adds MPT statement in paragraphs 5-6
By Dietrich Knauth
Aug 19 (Reuters) -Bankrupt Steward Health Care sued its landlord on Monday, saying it has impeded Steward's effort to sell 31 hospitals in an effort to "siphon all value" for itself, leaving little or nothing for Steward’s hospital operations or its other creditors.
Medical Properties Trust (MPT) has insisted that its real estate is much more valuable than Steward's hospital operations, and its position has thus far prevented Steward from successfully selling the hospitals, the privately owned Dallas-based hospital chain said in a complaint filed in Houston bankruptcy court.
"MPT's sales process interference and brinksmanship jeopardizes the future of dozens of hospitals, tens of thousands of jobs, and the safety of patients," Steward said.
The lawsuit asked U.S. Bankruptcy Judge Christopher Lopez, who is overseeing Steward's bankruptcy, to step in and determine how proceeds from future hospital sales should be allocated between the hospital operations and the real estate.
MPT denied interfering with Steward's marketing and sales efforts, and said that it had worked with potential buyers and tried to ensure that Steward's hospitals remain open.
"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," MPT spokesman Drew Babin said Monday.
Steward, which filed for bankruptcy protection in May, initially began leasing property from MPT as a result of a controversial 2016 transaction in which Steward's former private equity owners sold the land to MPT and saddled the company with high long-term rent obligations. Steward, initially based in Massachusetts, then began a nationwide expansion in partnership with MPT, eventually growing to operate 31 hospitals in eight U.S. states.
Massachusetts politicians and U.S. Senators have attributed Steward's financial instability to its private equity owners, corporate management and landlords, arguing that they have enriched themselves while undermining patient care.
Steward did not immediately respond to a request for comment.
Steward announced the closure of two Massachusetts hospitals in July, and Massachusetts officials announced that one additional hospital would be seized and transferred to a new owner.
Steward has attempted to address its $9 billion debt by selling all of its hospitals, but it said that MPT has blocked its efforts to transfer the hospitals to new owners.
It has been unable to convince MPT to sell its real estate to new hospital operators on reasonable terms, or enter into new leases with the buyers, and the "disputes have prevented otherwise viable sales from proceeding," Steward said.
Steward’s other creditors intend to file a separate complaint challenging the transactions that led to MPT's ownership of the hospital real estate, according to Steward. The creditors' action would "raise a bona fide dispute as to whether MPT actually owns the underlying real property," Steward said in Monday's complaint.
The case is In re: Steward Health Care System LLC, U.S. Bankruptcy Court for the Southern District of Texas, No. 24-90213.
For Steward: Ray Schrock of Weil, Gotshal & Manges
For Massachusetts: Hugh McDonald and Andrew Troop of Pillsbury Winthrop Shaw Pittman
For Medical Properties Trust: Emil Kleinhaus of Wachtell, Lipton, Rosen & Katz
Read more:
Bankrupt Steward Health puts its hospitals up for sale, discloses $9 bln in debt
Bankrupt Steward Health Care sells physician network as Massachusetts hospital seized
Bankrupt Steward Health to close two Massachusetts hospitals
US Senate probes Steward Health bankruptcy, subpoenas CEO
Reporting by Dietrich Knauth in New York
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