A Texas bankruptcy judge has approved Orlando Health’s “stalking horse bid” for three Florida hospitals operated by Steward Health Care, which has filed for Chapter 11 production.
Judge Christopher Lopez’s order on Thursday acknowledged that Orlando Health is a qualified bidder and its $439 million offer is a qualified first bid.
The order came in the wake of a legal squabble between Steward and Medical Properties Trust, which owns the hospitals’ buildings and land and leases them to Steward.
MPT had contested the bid, claiming Steward had not properly followed bidding procedures because the offer did not distinguish between the values of hospital operations and the real estate.
Stewart disagreed and filed a complaint that accused MPT of interfering in the sales processes as it attempts to shed assets through bankruptcy.
Orlando Health wants to pay cash for Melbourne Regional Medical Center and Rockledge Regional Medical Center, in Brevard County, and Sebastian River Medical Center, in Indian River County. The amount could be adjusted based on a series of factors.
Orlando Health is designated as what is known in bankruptcy cases as a “stalking horse bidder,” which sets an initial bid and floor price for auction.
Orlando Health has financial protections as a “stalking horse bidder.” Should Steward accept a higher bid, it would pay Orlando Health a $13.5 million break-up fee and $6.5 million reimbursement, according to court documents.
Other potential buyers of the three hospitals face a Monday deadline for submitting bids.
No other known bids for the “Space Coast” hospitals are known. However, a report on VeroBeach.com cites “informed sources in the Indian River County medical community” saying that AdventHealth and HCA may be preparing to get involved.
An auction, if needed, would be Aug. 29. The sale hearing is scheduled for Sept. 10.
Dallas-based Steward Health filed for bankruptcy in May. In addition to eight hospitals in Florida, it has been attempting to move others in Arizona, Arkansas, Louisiana, Massachusetts, Ohio, Pennsylvania and Texas.
Other happenings in the bankruptcy case:
Steward recently asked judge to reject the master lease it has with MPT for its hospitals in Florida and other states. The court had rejected a master lease for Steward’s Massachusetts hospitals in July. Steward believes selling the properties would be easier without the leases.
On Monday, however, MPT filed a document saying that if Steward wants to cancel leases, it will have to give up its hospital operations to MPT.
“It is frivolous for the Debtors to claim that they can continue to operate their businesses in MPT’s property, generate revenue for the benefit of the estate and secured lenders, but not pay any rent,” the filing reads.
“As courts have recognized,” the attorneys wrote, debtors either must pay rent or “hand over the keys.”
MPT’s filing also said that if it took over hospitals, “the company is both able and willing to keep them running until they can find new operators, which is more than Steward seems to claim.”
Meantime, for the seventh time in three months, Steward has pushed back a sales hearing related to six Massachusetts hospitals and those in Arkansas and Louisiana. The latest change moves the date from Tuesday to Sept. 4. Steward and Massachusetts’ governor had indicated buyers had been found, but no purchase deals have been signed as of Monday.
Two of the Bay State hospitals have been approved for closure by the court. They are scheduled to shutter by Saturday, with more than 1,200 layoffs expected.
One of them, Nashoba Valley Medical Center in Ayer, was the site of a demonstration Monday in which hundreds of protesters formed a human chain around the building to emphasize the importance of the hospital in the community.
Last week, the company that controls Steward’s properties for MPT in Massachusetts rejected Gov. Maura Healey’s proposal to save St. Elizabeth Medical Center in Boston through eminent domain.
Apollo Global Management, an affiliate of MPT, said the state’s $4.5 million offer is a fraction of the property’s assessed value of more than $200 million, NPR Boston affiliate WBUR reports.
Meantime, the judge ordered Steward not to take immediate action to close a Pennsylvania hospital that is short on funds, while allowing the company to proceed with two closures in Ohio.
Pennsylvania Attorney General Michelle Henry said in a filing that while a potential buyer has been lined up for a Sharon Hospital, Steward was threatening to close the facility if the state didn’t provide $1.5 million in emergency operating funds.
Information from News Service of Florida was used in this report.
