Medical Properties Trust Inc.’s stock (MPW) took a significant hit, dropping by 20% in premarket trading on Friday. The real estate investment trust revealed that its tenant, Steward Health Care System, is currently $50 million behind in rent payments. This news has caused the stock to approach a 14-year low, with its last close below $4 in April 2009.
Financial Impact
In response to this issue, Medical Properties Trust Inc. (MPT) is taking a fourth-quarter, non-cash charge of approximately $225 million. This charge is mainly to account for the write-off of consolidated straight-line rent receivables and other related items. Although MPT hopes to avoid further impairment of real estate and non-real estate assets, there are no guarantees about the future.
Recovery Efforts
Despite the challenging situation, MPT remains determined to recover the uncollected rents and outstanding loan obligations from Steward. In light of recent changes to vendors’ payment terms negatively impacting Steward’s liquidity, MPT has enlisted the assistance of Alvarez & Marsal Securities LLC as its financial advisor. Together, they will explore options and develop strategies to recover the rent.
A New Bridge Loan
As part of their efforts to address the financial strain caused by Steward’s delinquency, MPT has agreed to fund a new $60 million bridge loan. This loan will be secured by all of MPT’s existing collateral and will include new second liens on Steward’s managed care business. These new liens will be subordinate only to Steward’s asset-based lenders.
Outlook
Medical Properties Trust Inc. is expected to report its fourth-quarter results on Feb. 1. Investors will be keen to learn more about the company’s plans for recovering from this setback and any potential long-term implications.
