Steward Lender Deal Approved for Ch11 Vote

A Texas bankruptcy judge has approved a crucial settlement between Steward Health Care and its secured lenders, clearing the way for a creditor vote on the hospital chain’s Chapter 11 bankruptcy plan. The judge stated that this deal is the only realistic path for other creditors to recover any value from the bankruptcy process.

• Settlement Approval: The settlement, described as a "final global settlement order," severs Steward’s relationship with its primary landlord, Medical Properties Trust (MPT), and allows for the continued operation of key hospitals, including Trumbull Regional Medical Center and Hillside Rehabilitation Hospital. Interim managers have taken over operations at these and other facilities as part of the transition.

• Hospital Transfers and Sales: The agreement enables the transfer of more than a dozen hospitals to new operators, preventing closures and resolving billions in lease obligations. The settlement also includes procedures for conveying properties and allows for objections before any transfer is finalized.

• Distribution of Proceeds: The deal outlines the distribution of $395 million from the sale of Steward’s northern Florida hospitals to lenders and unsecured creditors.

• Creditor Vote on Chapter 11 Plan: With the settlement in place, Steward is now able to put its Chapter 11 plan to a creditor vote, a critical step in the bankruptcy process.

• Continued Operations: Steward’s hospitals remain open and operational during the restructuring, with ongoing efforts to sell or transition additional facilities.

• Senate Scrutiny: The bankruptcy and Steward’s management practices have drawn attention from lawmakers, with a Senate committee scheduled to investigate the company’s financial management and its impact on patient care.

U.S. Bankruptcy Judge Christopher M. Lopez emphasized that the settlement is in the best interest of Steward and its creditors, providing the only viable opportunity for a successful restructuring and creditor recovery.

Background

Steward Health Care, based in Dallas, filed for Chapter 11 bankruptcy protection on May 6, 2024, citing billions in debt. The company has since been working to sell off its hospitals and resolve its financial obligations.

What’s Next

• The final terms of the settlement are expected to be completed soon, with Judge Lopez set to make a final ruling later this month.

• Creditors will vote on the Chapter 11 plan, and further sales or transitions of hospital operations are anticipated as part of the restructuring.

Key Takeaways for Alternative Finance Lenders

Sale-Leaseback as Synthetic Financing

The main issue Steward faced was viewing their sale-leaseback deals with Medical Properties Trust (MPT) as a way to finance their operations, when in reality, these deals were more like a temporary fix that led to bigger, long-term issues. By selling their real estate to a REIT and then leasing it back, they were turning their property equity into ongoing debt payments that just kept piling up.

Separating Operations from Real Estate 

When Steward decided to sell their hospitals to MPT and then lease them back, they gave up control of their most important asset. In the world of healthcare lending, real estate is usually the go-to safety net when things start to go south. By breaking this connection, they set themselves up for a tough challenge: their operational cash flow now has to cover both debt and rent. This double financial load can quickly become unmanageable if things take a turn for the worse.

REIT Partnership Concentration Risk 

Steward put all their eggs in one basket by relying too much on just one REIT partner for their real estate plans. When things went south with that partner, as shown by their decision to cut ties with MPT in the settlement, it caused a big shake-up throughout their hospital network. A wise approach to healthcare financing involves spreading out real estate strategies to prevent any single point of failure.

Lease Obligations That Survive Everything 

The "billions in lease obligations" mentioned in the case highlight another structural problem - these rental commitments often survive bankruptcy and take priority over traditional lenders. When structuring healthcare deals, always model scenarios where lease payments become senior to your debt service. If the math doesn't work in that scenario, the deal doesn't work.

1-Minute Video: Cobalt Intelligence Contractor License Verification API

Manual verification is a business killer.

Seconds vs. hours for contractor license verification

Real-time compliance checking means fewer bad loans in your portfolio

Your underwriters can process 10x more applications when they're not buried in manual research

Schedule a FREE demo call

Headlines You Don’t Want to Miss

Truist initiates coverage on Payments/FinTech stocks

Truist Securities has launched coverage of the Payments and FinTech sector with a notably mixed outlook, reflecting the industry's evolving challenges and opportunities. The initiation, announced on June 2, 2025, includes ratings for 17 companies: 7 Buy, 7 Hold, and 3 Sell

TransferMate and Deutsche Bank Announce Strategic Partnership

TransferMate, a leading provider of embedded B2B payments infrastructure as a service (IaaS), has announced a strategic partnership with Deutsche Bank, one of the world’s largest financial institutions. This collaboration, revealed at the end of May 2025, marks a significant step for both organizations in expanding global payment capabilities and enhancing cross-border financial services.

How Pagaya (PGY) and Upstart (UPST) are venturing deeper into AI to make fintech lending more intelligent

Pagaya and Upstart are advancing the use of artificial intelligence in fintech lending by operationalizing sophisticated AI models that analyze alternative data, enabling more accurate and inclusive credit decisions beyond traditional metrics like FICO scores. This deeper integration of AI allows both companies to expand credit access, streamline loan approvals, and empower financial institutions to serve a broader range of borrowers with greater efficiency and precision.