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Steward Health Care System, a hospital operator and the main tenant of Medical Properties Trust, has filed for Chapter 11 bankruptcy protection. The company will receive debtor-in-possession financing from MPT — initially $75M, but up to an additional $225M.
MPT stock dropped more than 9% on Monday morning after the bankruptcy announcement. The company is facing its own financial pressures, partly stemming from at least $50M in rent Steward hasn't paid. Previous loans MPT made to Steward total in the tens of millions of dollars.
The REIT has also come under fire from public officials and short sellers for its business practices. U.S. senators from Massachusetts sent a letter to MPT last month urging it to take action on the facilities run by Steward, saying the lending to Steward has the "appearance of a Ponzi scheme that continues to harm Steward-owned hospitals."
Last month, MPT sold a majority interest in five hospitals in Utah in an effort to shore up its balance sheet, with an investment fund paying $886M for the properties. In February, MPT agreed to sell five hospitals in California and New Jersey to tenant Prime Healthcare for $350M.
Steward said in a statement that day-to-day operations of its hospitals won't be affected. The company operates 32 hospitals in eight states.
Steward blamed high costs and “insufficient reimbursement” from the federal government for its woes, although in Massachusetts, Steward hospitals receive the same or better than many others in the state, The Boston Globe reported.
Earlier this year, the company said it was going to close its hospitals in Massachusetts, which caused an outcry. Eight of the nine hospitals Steward runs in that state are still open.
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