Private equity firm Leonard Green & Partners is looking to sell its controlling stake in Los Angeles-based Prospect Medical Holdings, leaving it with $1.3 billion in financial obligations, according to ProPublica. While four states have approved the deal, Rhode Island has not.
Leonard Green, which owns about 60 percent of Prospect Medical, announced plans in October 2019 to sell its stake to Prospect Medical's CEO and a longtime business partner for $12 million plus the assumption of $1.3 billion in lease obligations.
When the deal was announced, Prospect Medical said it expected the sale to close in the spring of 2020.
Although the transaction easily passed in the four states where Prospect owns 15 hospitals, it has faced pushback in Rhode Island, where the hospital chain owns two hospitals.
The deal requires Rhode Island's attorney general and health department's approval, but officials in the state have subjected the deal to a high level of scrutiny.
According to ProPublica, there have been multiple rounds of public hearings on the deal and interviews sought with company officials.
Rhode Island officials delayed their decision in November, citing missing documents and unanswered questions. Then the decision deadline was slated to be the end of January, but it has been pushed back again.
Rhode Island officials said that "as of this date, we do not have a new deadline for completing the review," according to ProPublica.
A bill introduced by Rhode Island Senate President Dominick Ruggerio, a Democrat, threatens to derail the transaction. His proposal would impose a one-year moratorium on the transfer of hospital ownership that involves for-profit entities as the acquiree or acquirer, according to the report. In proposing the bill, Mr. Ruggerio cited the proposed Prospect Medical deal.
ProPublica previously reported that Leonard Green and its investors extracted $645 million in dividends and fees for itself from Prospect Medical. According to the report, the private equity firm extracted the dividends by loading Prospect Medical with debt, rather than from profits.