The week did not start very well for investors of Medical Properties Trust (NYSE:MPW). Shares of the healthcare-focused REIT are down ~9%, as news broke that one of its tenants had filed for bankruptcy protection
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In what represents one of the most significant hospital bankruptcies witnessed in decades, Steward Health Care, the biggest U.S. physician-owned hospital operator and Medical Properties Trust’s largest tenant, said it is in the process of securing debtor-in-possession financing from MPW, with an initial sum of $75 million and the potential for an additional $225 million, subject to specific conditions.
The company has attributed its decision to file for bankruptcy to several key factors, including rising expenses such as labor, materials, and operational costs, inadequate reimbursement from government payors, ongoing repercussions from the COVID-19 pandemic, and various other challenges.
The problems have been piling up for a while for Steward. According to The Wall Street Journal, a Steward hospital in Florida faced a bat infestation, while another in the state had its waste collection services discontinued due to unpaid bills. Steward, which operates 30 hospitals across eight states, has been known to be under financial pressure with MPW stating in January that its outstanding rent owed had reached approximately $50 million.
MPW is due to announce Q1 results on Thursday, May 9, when the company will most likely offer more insight into this development. For Deutsche Bank analyst Omotayo Okusanya, the progress the company has been making on asset sales is a significant positive.
“We believe the recent announcement of (1) $480M in asset sales from selling assets to Prime Healthcare and selling the syndicated term loan investment in Median and (2) $1.1B in proceeds from the recently announced JV on the five Utah assets operated by CommonSpirit are major positives for the MPW story,” Okusanya explained. “With over $1.5B in liquidity from these sales, we believe MPW can successfully address all debt maturities up until 2025 with sales proceeds used on a near-term basis to pay down the line of credit ($1.5B outstanding as of 4Q23).”
All in all, Okusanya rates MPW shares a Hold (i.e., Neutral), while his $5 price target suggests the stock has upside of 12.5% for the next 12 months. (To watch Okusanya’s track record, click here)
Looking at the consensus breakdown, based on an additional 1 Hold, 1 Sell, and 2 Buys, MPW boasts a Hold consensus rating. The average price target stands at $4.20, implying the shares will decline by ~5% from current levels. (See MPW stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.