Unpaid Rent Drama: Medical Properties Trust's Stock Nosedives As Tenant Steward Struggles, Prompting New Loan

Medical Properties Trust Inc MPW shares are diving today by around 15% after it disclosed plans to reduce its exposure to tenant Steward Health Care System.

Steward has delayed paying a portion of its September and October rent to MPT, as disclosed in the company's third quarter 2023 Form 10-Q.

Steward recently informed MPW that significant changes in vendor payment terms have negatively impacted its liquidity despite efforts to obtain additional working capital financing and sell its non-core laboratory business in Q4 2023.

As of December 31, 2023, Steward's total unpaid rent under its consolidated master lease with MPW is around $50 million (exclusive of $50 million previously deferred and not currently payable related to the Norwood Hospital, which is under reconstruction).

To protect the value of its assets and hospital operations, MPW has agreed to fund a new $60 million bridge loan secured by all its existing collateral plus new second liens on Steward's managed care business, subordinate only to Steward's ABL lenders.

A portion of MPW's existing transaction-specific and working capital loans of around $215 million to Steward will now be secured by these same second liens on the managed care platform. 

MPW has also consented to the deferral of unpaid rent under the consolidated master lease (as of December 31, 2023) and limited and tapering deferral of about $55 million of 2024 rents until the earlier of June 30, 2024, or the completion of anticipated asset sales. 

The company projects partial cash rent payments to restart in February, including about $9 million in Q1 and around $44 million in Q2 2024.

As there is no assurance that Steward will successfully execute its plans or MPW will recover all rents and loans, the company expects to record a non-cash charge in Q4 2023 to write off consolidated straight-line rent receivables of about $225 million, approximately $25 million share of straight-line rent receivables related to the unconsolidated Massachusetts partnership and consolidated unpaid rent receivables of roughly $100 million.

Price Action: MPW shares are down 20.8% at $3.96 premarket on the last check Friday.