Hospital Tenant for Medical Real Estate Trust Refinancing Advisor

Hospital System Health Care Property Owner Medical Properties Trust’s largest tenants Steward Health Care and Prospect Medical Holdings,
The company has sent financial advisers to help it refinance its credit facilities in the face of recent financial difficulties, the people said.

The stewards have hired Guggenheim Securities to refinance an asset-based loan that is due at the end of the year, according to people familiar with the matter. Prospect Medical has been advised by Houlihan Lokey on refinancing, according to other people familiar with the matter.

Investment banks are known for helping companies raise capital when financial problems or hardships make it difficult for them to access the public markets.

A representative of the stewards said it is customary to refinance asset-based lines of credit well in advance of their maturity date, putting them in a favorable position to make such deals as the company’s finances are recovering from pandemic-related pressures. added. A representative for Prospect declined to comment.

Each of Prospect and Steward’s past private equity owners sold their respective company-owned medical facilities and real estate to MPT several years ago, and the hospital system was set to pay rent on the previously owned real estate. rice field. MPT itself, one of the country’s largest medical landlords, has also faced questions about its exposure to stewards and prospects after a difficult time for the hospital.

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S&P Global Ratings downgraded MPT’s credit rating to two notches below investment grade in March, citing signs of financial trouble at Steward and rent arrears at Prospect.

MPT shares fell 11% to $7.52 on Friday.

MPT Chief Financial Officer Steven Hamner told analysts on an earnings call last month that prospects, which have been trying to refinance a loan facility since last year, are now close to closing deals. He also said Prospect has a binding commitment from the three parties to refinance the credit facility.

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Steward and Prospect are two of MPT’s three largest tenants, accounting for more than 27% and 10% of landlord income in the fourth quarter of 2022, respectively, according to public documents. Landlords’ exposure to rent income from stewards is expected to drop to about 20% after five Utah hospitals were sold to another operator on May 1. S&P said the buyer’s investment grade rating will improve the quality of MPT’s tenants.

MPT supports stewards and prospects through loans to the hospital system, and both companies recently sold part of the hospital to raise money to pay off debt. According to S&P, hospital administrators were under pressure last year as labor shortages generally drove up costs and, in some cases, limited their ability to see and treat patients.

Hamner also said on an earnings call last month that MPT is ready to provide up to $75 million in funding to help refinance Prospect’s credit facility. Prospect stopped paying rent in the final quarter of last year, but plans to resume payments in September, he said.

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During an earnings call last month, Hamner said a $50 million loan from landlords to Prospect’s managed care business in the first quarter facilitated access to outside funding. The loan is convertible into an equity stake in Prospect’s managed care business, and he believes MPT is worth more than hospitals in the system.

Prospect has also used former private equity owners to exploit debt-backed dividends and threaten to close safety-net hospitals that are obliged to treat patients, regardless of whether they have insurance or not. It has been the subject of criticism and government scrutiny. finance condition.

A spokeswoman for MPT said the company’s core mission is to ensure that the hospitals in its portfolio remain financially sound and continue to serve their communities over the long term. “None of the hospitals in our portfolio have gone bankrupt or scaled back due to inability to pay rent because rent represents a small percentage of total hospital costs,” said a spokesperson. person said.

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In the midst of the Covid-19 pandemic, many hospitals were hit financially as they were forced to cancel lucrative elective surgeries. Some for-profit businesses sought federal or state funding.

The Steward, like other hospital systems serving low-income communities, struggled in the years of the pandemic, but is now doing well both operationally and financially as the country emerges from COVID-19. A representative said the situation was dire.

This year, the stewards used the proceeds from the sale of the Utah hospital to repay $100 million of a $150 million loan from MPT.

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