Judge OKs Steward Chapter 11 plan – Becker’s Hospital Review | Healthcare News
U.S. Bankruptcy Court Judge Christopher Lopez approved Dallas-based Steward Health Care’s Joint Chapter 11 Plan of Liquidation on July 25, allowing the financially troubled system to distribute proceeds to creditors and wind down operations.
Steward sought Chapter 11 bankruptcy protection May 6, 2024, and has since worked to offload or close its hospitals.
The updated 179-page plan, which was filed July 11 and obtained by Becker’s, details the creation of two new trusts to oversee distributions and litigation recoveries and the orderly dissolution of Steward’s assets.
Under the plan, FILO bridge lenders, pension benefit guaranty corporation and general unsecured creditors will receive distributions from a plan trust that will manage estate assets. A separate litigation trust will seek retained legal claims connected to previous ownership transfers and transactions. No distributions will be made to equity holders, and interests and stock in Steward will be canceled on the effective date of the plan.
PBGC will receive an $8.75 million claim, with PBGC and general unsecured creditors sharing 90% of recoveries until specific senior lenders are paid in full. A final disclosure statement was approved by the court, which set an Aug. 14 deadline for specified and administrative claim filings.
The original version of the plan was introduced on May 28 after the U.S. Trustee for the Southern District of Texas filed an expedited motion to convert Steward’s Chapter 11 case to a Chapter 7 liquidation to to its inability to pay around $127 million in administrative claims.
While Mr. Lopez approved the Chapter 11 plan, which faced more than 50 objections, he rejected pending motions to convert the cases to Chapter 7, according to a July 28 news release from Steward’s legal representative, Weil.
“Judge Lopez lauded Weil and Steward’s independent directors and other advisors for their professionalism, skill, and good faith throughout these complex and unprecedented cases and credited the estate for its extraordinary efforts to save jobs, save hospitals and do everything within its power to maximize recovery for creditors,” the release said.
The news comes after Steward filed a July 15 lawsuit against its former chairman and CEO, Ralph de la Torre, MD, and other top system executives, with claims their insider transactions drained the health system’s assets and aided to its financial downfall. Dallas-based Tenet Healthcare was also named as a defendant in the lawsuit regarding its $1.1 billion purchase of five Steward Florida hospitals in 2022. Steward claims the facilities were initially valued at $895 but were overvalued due to Dr. de la Torre’s desire to “build a hospital empire” in Miami.
“Dr. de la Torre disputes the allegations of wrongdoing and will vigorously defend himself against them,” a spokesperson for Dr. de la Torre said in a July 16 statement shared with Becker’s.