Shares of Medical Properties Trust (NYSE:MPW) (MPT) sank Friday after the company announced efforts to recover uncollected rents and outstanding loan obligations from Steward Health Care System.
In addition, MPW revealed plans and processes designed to significantly reduce its exposure to Steward.
Steward delayed paying a portion of its September and October rent to MPW. Furthermore, despite obtaining additional working capital financing and selling its non-core laboratory business in Q4, Steward recently told MPW that its liquidity has been negatively impacted by significant vendor payment terms changes.
As of 10:20 am ET, MPW shares are down more than 29% at $3.53 per share.
While Steward has continued to make partial monthly rent payments, the total unpaid rent under its consolidated master lease with MPW is approximately $50 million as of December 31. That number is exclusive of the roughly $50 million that was previously deferred and not currently payable.
MPW has now hired finance and legal advisors to help it ascertain the options available and enable the recovery of uncollected rent and outstanding loans.
"MPT's management team and advisors have worked closely with Steward and its own advisors 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," stated MPW.
As part of the plan, Steward said it is pursuing several strategic transactions, including the potential sale or re-tenanting of certain hospital operations as well as the divestiture of non-core operations.
Steward will seek a third-party capital partner for its managed care business, with net proceeds used in part to repay all outstanding obligations to MPW and it has intensified measures to improve collections and overall governance.
To protect the value of MPW's assets and hospital operations while Steward conducts its strategic plan, MPW will fund a new $60 million bridge loan secured by all MPW's existing collateral and new second liens on Steward's managed care business, subordinate only to Steward's ABL lenders.
Part of MPW's existing roughly $215 million of transaction-specific and working capital loans to Steward will also be secured by the same second liens on the managed care platform.
MPW has consented to the deferral of unpaid rent under the consolidated master lease as of December 31, 2023, as well as a limited and tapering deferral of approximately $55 million of 2024 rents until the earlier of June 30, 2024, or the completion of anticipated asset sales.
However, the company warned there is no assurance Steward will successfully execute its plans or that it will be able to recover all of its deferred rent and loans outstanding to Steward.
Therefore, as it cannot be assured that Steward will make all scheduled lease payments, under generally accepted accounting principles, the company expects to record a non-cash charge in the fourth quarter of 2023 of approximately $225 million, which is around $25 million share of straight-line rent receivables related to the unconsolidated Massachusetts partnership and consolidated unpaid rent receivables of roughly $100 million.