Healthcare Landlord Takes Control of Struggling California Entities
Medical Properties Trust Inc., a leading hospital landlord in the US, has taken drastic measures to address a debt default by Prospect Medical Holdings, the owner of three Southern California healthcare entities. The move comes after Prospect failed to make cash rent payments during the third quarter, citing liquidity issues due to ongoing sales processes in various east coast markets.
Default Sparks Action
In a letter dated November 18, Medical Properties Trust demanded that the board members of three Prospect units resign, making way for independent managers designated by MPT. The company warned that if the debt default is not resolved, it may still foreclose on the properties. This development marks a significant escalation in the dispute between the two companies.
A Complex Relationship
Medical Properties Trust buys medical facilities and leases them back to operators, allowing it to maintain a hands-off approach to hospital operations. In 2019, Prospect sold several properties to MPT as part of a $1.55 billion deal. However, Prospect’s financial struggles led to a restructuring of the agreement last year, resulting in MPT holding over $1 billion worth of assets related to Prospect.
Refinancing and Restructuring
Despite refinancing some debt, Prospect still owes hundreds of millions of dollars to Medical Properties Trust and other lenders. This is not the first time MPT has clashed with medical firms operating on its properties. Bankrupt hospital operator Steward Health Care System previously accused MPT of interfering with a court-approved plan to sell properties and pay off creditors.
A New Era of Oversight
As the largest hospital landlord in the US, Medical Properties Trust is taking a proactive approach to protecting its interests. By asserting its right to appoint new independent directors to the boards of certain Prospect entities, MPT aims to ensure that its properties are managed effectively and efficiently. The fate of Prospect’s flagship entity, Alta Hospitals System, hangs in the balance as this drama unfolds.
Leave a Reply