Dallas-based Steward Health Care System was approximately $50 million behind on its rent at year-end to Medical Properties Trust, the largest hospital landlord in the U.S.
Medical Properties Trust said in a Jan. 4 news release its management team and advisers have been working with Steward and its own advisers to "develop an action plan which, if successful, is designed to strengthen Steward’s liquidity and restore its balance sheet, optimize MPT's ability to recover unpaid rent, and ultimately reduce MPT's exposure to Steward."
MPT disclosed in the third quarter of 2023 that Steward delayed paying a portion of its September and October rent, according to the release. The health system recently informed MPT that, despite obtaining additional working capital financing and selling its noncore laboratory business in the fourth quarter, its liquidity has been negatively affected by changes to vendors' payment terms. Steward has continued to make partial monthly rent payments.
As part of the plan, Steward is pursuing the potential sale or re-tenanting of certain hospital operations and divestiture of noncore operations, according to the release. Steward has also committed to seeking a third-party partner partner for its managed care business, net proceeds from which will be used in part to repay all outstanding obligations to MPT.
Steward has also intensified efforts to improve collections and overall governance, according to the release. This has included the establishment of a transformation committee composed of newly appointed independent directors and the submission of periodic cash activity and asset sale progress reports to MPT and its ABL lenders.
MPL has consented to the deferral of unpaid rent as of Dec. 31, as well as limited and tapering deferral of about $55 million of 2024 rents until the earlier of June 30 or the completion of anticipated asset sales. Partial cash rent payments are expected to resume in February, including about $9 million in the first quarter and $44 million in the second quarter.
Steward is MPL's largest tenant, according to The Wall Street Journal.
Steward did not immediately respond to a request for comment Jan. 8.