FX.co ★ Medical Properties Stock Hit As Steward Health Files For Bankruptcy

Shares of Medical Properties Trust, Inc. fell by about 10% in its initial trading on the New York Stock Exchange following an announcement by its tenant, Steward Health Care System, that it's filing for bankruptcy protection. The Steward Health Care System is the largest physician-led hospital operator in the United States.

In a Chapter 11 filing with the U.S. Bankruptcy Court for the Southern District of Texas, Steward pointed to increased operational costs, insufficient Government reimbursements, and the ongoing impact of the Covid-19 pandemic as major reasons for their financial difficulties. As part of the bankruptcy filing, Steward Health is negotiating debtor-in-possession financing terms with Medical Properties Trust. It anticipates an initial funding approval of $75 million, with a potential for an additional $225 million.

Ralph de la Torre, Steward's Chief Executive Officer, stated that they have secured bridge financing and made strides towards the sale of their Stewardship Health business in recent months which aimed to stabilize operations across all their hospitals. However, delay in the transaction has compelled Steward to explore other ways to support their operations.

Steward Health Care, based in Dallas, Texas, is under intense financial pressure as its struggles with government's inadequate reimbursement rates, escalating labor expenses, inflation-driven rise in material and operational costs, and persistent impacts of the COVID-19 pandemic. Despite these challenges, the company insists that it will continue to maintain hospital operations and patient care aided by the additional financing.

The company currently manages hospitals across multiple states, including Arizona, Arkansas, Florida, Louisiana, Massachusetts, Ohio, Pennsylvania, and Texas. It is a significant private for-profit health system, operating 33 hospitals and employing 33,000 people in the United States as of the start of 2024.

Previously, in January, Medical Properties Trust reported that Steward owed approximately $50 million in overdue rent, leading them to intend to minimize their investment in Steward. It was also revealed that Steward was considering strategic transactions such as potential sales of certain hospital operations and divesting non-core operations.

Steward now expects to proceed with necessary patient care in their communities despite their financial predicament. They do not foresee any operational disruption throughout the bankruptcy process. In fact, they assure that Steward's hospitals, medical centers and physician's clinics remain open and will continue to serve patients.

At the end of initial trading on the NYSE, Medical Properties Trust's shares were priced at $4.39, signifying a decline by 9.86%.