Steward's debt and financial condition before the bankruptcy

analysisThe consolidated financial statements of Steward Health Care System LLC for 2020 and 2019, filed with the SEC as Exhibit 99.1, carry an independent auditors' report dated June 3, 2021 (Dallas, Texas) stating that the 2020 statements present fairly, in all material respects, the company's financial position; the 2019 statements had been audited by Ernst & Young LLP (Dallas), whose report was dated May 29, 2020 and, according to the 2020 report, was unmodified. In the notes the company reported operating losses, an accumulated members' deficit of $1.524 billion and adjusted negative working capital of $133.9 million as of December 31, 2020, with access to $254.0 million on its line of credit. After evaluating whether conditions raised substantial doubt about its ability to continue as a going concern, it stated that it had adequate liquid assets and access to credit and capital to meet its operating cash needs. ¹

analysisOn June 20, 2011 Steward Health Care System LLC and certain subsidiaries and affiliates, as co-borrowers, and Steward Health Care Holdings LLC, as guarantor, entered into a revolving credit agreement with three financial institutions, later amended. At December 31, 2020 about $279.5 million was outstanding under the revolver, $20.1 million of letters of credit were issued and $253.5 million was available; borrowings were secured by the system's tangible assets other than real property. The audited statements report rent expense of about $385.2 million for 2020 and $383.8 million for 2019 under the system's capital and operating leases of buildings, office space and equipment. ¹

analysisAccording to the audited 2020 statements, the Steward system received about $441.7 million in 2020 through the Public Health and Social Services Emergency Fund (PHSSEF) and various state and local pandemic programs, of which about $389.5 million was recognized as revenue; it deferred $74.4 million of employer payroll taxes under the CARES Act; and it received Medicare accelerated payments of about $440.1 million in April 2020, of which about $165.1 million was carried as current and about $275.0 million as long-term at year-end. According to the debtors' 2024 first-day declaration (the sworn account of the business filed with the bankruptcy petitions), in April 2020 Steward Carney Hospital, Inc., Steward Norwood Hospital, Inc., Steward Sharon Regional Health System, Inc., The Medical Center of Southeast Texas, LP, Brim Healthcare of Texas, LLC, Steward HH, Inc., Steward NSMC, Inc., Steward PGH, Inc. and Steward CGH, Inc. borrowed about $448.9 million in unsecured Medicare Accelerated Advance Payment Program (MAAPP) loans, repaid through recoupment of Medicare payments by the Centers for Medicare and Medicaid Services; in December 2022 the $46.5 million outstanding balance was converted into amortizing loans at 4% with terms of three to five years, and about $32.2 million was owed at the petition date. ^{1 2}

analysisSteward's audited 2020 statements also record that Steward Health Care System LLC was under IRS audit for 2016 and 2017, and that it and the entity acquired in the IASIS merger were under audit by the states of Texas and Utah; liabilities for tax interest and penalties stood at $75.4 million at December 31, 2020, up from $59.3 million a year earlier. In 2019 the system sued the provider of an executory IT contract for an electronic health record and revenue cycle system that it had assumed in its 2017 acquisition of IASIS Healthcare Corp.; the complaint sought to recover over $200 million in damages and cited over $210 million in cash losses. The system began implementing a replacement IT system with a new vendor during fiscal 2020, and no potential recovery was recognized in the statements. ¹

analysisOn August 4, 2023 Steward Health Care System LLC, as borrower, and certain debtor affiliates entered into a credit agreement with Sound Point Agency LLC as administrative agent, Chamberlain Commercial Funding (Cayman) L.P. as collateral agent and Brigade Agency Services LLC as FILO agent. It provided a $300 million senior secured revolving facility (the ABL Facility, ABL standing for asset-based lending) and a $200 million senior secured term loan (the FILO Facility, “first in, last out”), with the ABL Facility having payment priority over the FILO Facility. According to the first-day declaration the facility provided $500 million of proceeds, most of which repaid the company's existing asset-based credit facility. Steward Health Care System LLC borrowed an additional $30 million of FILO term loans on October 16, 2023 and $70 million on November 17, 2023; that $100 million was used immediately to pay vendors, leaving the company without incremental revolver capacity despite $600 million of aggregate borrowing under the facility. It executed forbearance agreements with consenting lenders – agreements under which lenders hold off from enforcing their rights – on December 18, 2023, January 2, 2024 and February 21, 2024, paying consent fees in kind. About $607.8 million, including interest, was outstanding at the 2024 petition date, secured under an August 4, 2023 Pledge and Security Agreement by a first-priority lien on ABL/FILO priority collateral and a second-priority lien on MPT priority collateral. ¹

analysisOn February 21, 2024 Steward Health Care Network, Inc., Steward Emergency Physicians, Inc., Steward Physician Contracting, Inc., Steward Medicaid Care Network, Inc., Stewardship Health, Inc., Stewardship Health Medical Group, Inc. and Stewardship Services Inc., as borrower, entered into a credit agreement with certain FILO lenders and MPT TRS Lender-Steward, LLC, with Brigade Agency Services LLC as administrative and collateral agent, for a $150 million delayed-draw term facility funded equally by the participating FILO lenders and the MPT lender; about $274.5 million, including interest and a multiple-on-invested-capital amount, was outstanding at the petition date. Steward Health Care Holdings LLC is guarantor of a Secured Promissory Note dated February 3, 2022 (the Investor Note), made by Steward Health Care Investors LLC in favour of Cayman TRS Holding, an affiliate of Medical Properties Trust, in an original principal amount of $363.3 million. According to the first-day declaration about $397.9 million including interest was outstanding under it at the petition date; Steward Health Care Investors LLC had pledged its approximately 90.1% interest in Steward Health Care Holdings LLC to the noteholder, which agreed to a forbearance before the petition date. ^{1 2}

analysisIn a March 7, 2024 letter to Steward's chief executive, Senators Elizabeth Warren and Edward J. Markey, citing press reports and company releases, wrote that the 2020 Cerberus exit ultimately resulted in Steward borrowing another $335 million from MPT in January 2021, that Steward took on a loan of more than $600 million from a consortium of lenders in late 2023 and a further $60 million loan from MPT in January 2024, and that in February 2024 it took on a $150 million bridge loan. The loan figures broadly correspond to the facilities described in the debtors' May 6, 2024 first-day declaration. Cerberus stated on September 19, 2024 that when the note it received in the 2020 management buyout was voluntarily prepaid in 2021, the proceeds came from the note's obligors – affiliates of the former CEO and of MPT – not from Steward. ^{3 4}

analysisAccording to the debtors' first-day declaration of May 2024, the company engaged AlixPartners in October 2023 and Lazard in November 2023, and in December 2023 the debtors defaulted under the ABL/FILO facility by failing to make mandatory repayments from certain asset-sale proceeds and to comply with financial reporting and information obligations; at the petition date about $979.4 million of trade obligations were outstanding, about 70% of them more than 120 days past due. A January 26, 2024 trade-press report, summarizing a third-party review that is not among the documents reviewed, stated that Steward, then running 33 hospitals in eight states, had not publicly posted financial documents since 2020; that a July review of its finances by BDO USA, prepared in connection with a planned behavioral health facility in Massachusetts, showed revenues trending down and expenses rising; and that Steward carried only 10.2 days of cash on hand in 2023. The first-day declaration later stated that after the December 2023 default the debtors began to face a worsening liquidity crisis and needed a series of emergency bridge loans and other financial concessions from their secured lenders and their landlord, MPT, to fund operations. According to the same trade-press report, quoting a Steward spokesperson, Steward planned to shut services at the Beaumont campus of the Medical Center of Southeast Texas on February 2, 2024; the spokesperson attributed the closure to severe underutilization of services, said affected employees could apply for open roles at the neighbouring Port Arthur facility, and declined to clarify the center's performance relative to other locations. ^{1 2}

analysisIn an omnibus written consent dated May 5, 2024, which also authorized the Chapter 11 filings, Steward Health Care System LLC and IASIS Healthcare LLC resolved to terminate irrevocably, subject to Bankruptcy Court approval, the Steward Health Care Deferred Compensation Plan (amended and restated effective December 31, 2015) and the IASIS Healthcare Executive Savings Plan (effective July 1, 2006), and to notify the trustees of the related trusts of their insolvency after filing. ³

analysisAccording to the first-day declaration of chief restructuring officer John R. Castellano filed on May 6, 2024, the debtors had about $1.2 billion of funded debt and about $6.6 billion of long-term lease obligations at the petition date. The secured debt comprised the ABL First Out ($49.3 million), the ABL Facility ($247.3 million), the FILO Facility ($305.5 million), the Bridge Facility ($274.5 million), the MPT Facility ($216.7 million) and the MPT Stewardship Note ($82.5 million), totalling $1.2 billion. Selected unsecured liabilities came to about $8.0 billion: estimated MPT lease obligations of $6.6 billion, the Investor Note ($363.3 million), MAAPP loans ($32.2 million) and estimated trade payables ($979.4 million), for combined secured debt and selected unsecured liabilities of $9.2 billion. The declaration states that the lease figure is approximate and unaudited, includes deferred and unpaid rent and future undiscounted rent through October 31, 2041, and does not represent balance-sheet lease liabilities. ¹

analysisThe Chapter 11 petition of Steward Health Care System LLC filed on May 6, 2024 included a consolidated list of the 30 largest unsecured claims not held by insiders. The first seven were Change Healthcare LLC (trade debt and advances, $71,070,544.59), Philips North America LLC ($50,189,970.00), Medline Industries, LP ($43,245,837.88), AYA Healthcare, Inc. (trade debt and litigation, disputed, $42,247,240.44), Cerner Corporation (trade debt and litigation, disputed, $37,510,259.16), the Centers for Medicare and Medicaid Services (MAAPP loans, $32,162,911.00) and Cross Country Healthcare, Inc. ($31,084,880.39). Ranked eighth to fourteenth were Prolink Healthcare, LLC (trade debt and litigation, disputed, $30,771,115.61), the Internal Revenue Service (CARES Act deferred FICA tax liability, $28,357,915.63), Centura Health Corporation (contractual obligation, $28,095,544.05), Medtronic, Inc. ($24,729,130.00), Sodexo, Inc. ($15,474,541.53), Becton, Dickinson and Company ($14,967,528.36) and the Florida Agency for Healthcare Administration (trade debt, $14,492,098.16). The list closed with FinThrive, Inc. ($5,376,881.39) and ProMedical, LLC ($5,237,669.08), both listed as trade debt. ²

analysisIn their July 15, 2025 adversary complaint (a lawsuit brought within the bankruptcy case), the debtors named Medline Industries, LP, the Internal Revenue Service and the Pension Benefit Guaranty Corporation among creditors holding allowed or allowable unsecured claims against Steward Health Care System LLC, as the basis for avoiding transfers under section 544(b) of the Bankruptcy Code, which lets the estate pursue transfers that an actual unsecured creditor could challenge; for Steward Health Care Network, Inc. they named the Internal Revenue Service. A July 30, 2026 newspaper report on the Cerberus settlement stated that at least 1,300 entities are listed as creditors of Steward in court documents and that it was unclear how many of them would be part of the litigation trust receiving the settlement money; that count comes from the newspaper's summary of court documents, not from a review of the claims register. ^{3 4}

analysisA March 3, 2024 newspaper report stated that, according to Florida Agency for Health Care Administration data, Steward Florida Holdings LLC earned $37.7 million in profits across the company's 10 Florida hospitals in 2021, while unpaid bills at Steward's two hospitals in Brevard County alone exceeded $1 million. Based on Brevard County court records, the report said that Alerion Door and Glass Inc. sued Steward over more than $50,000 in unpaid bills for door installations and that Steward was in default on that suit by November 2022 after failing to respond; that on February 20, 2024 Steward was found in default on a suit by the construction firm PeakCM LLC over more than $50,000 in unpaid bills; that Rentokil North America had sued the previous fall over bat-removal work at Rockledge Regional Medical Center that cost $936,320, seeking over $1.6 million including damages, interest, court costs and attorney's fees; and that Nunez Lawncare and Landscaping Inc. had sued that month for $59,387.40 in unpaid bills for 2022 services at Steward's Brevard locations. These are the plaintiffs' allegations as the newspaper described them from county court records, not court findings, and the court files were not reviewed; the report said Steward representatives had not responded to its emailed questions before publication. PeakCM, LLC is listed as a creditor party in Steward's bankruptcy case, and the Chapter 11 docket lists an adversary proceeding brought by the debtors against Rentokil North America (No. 4:25-ap-03146), dated April 11, 2025, whose subject is not shown in the reviewed record. ^{1 2}

analysisA February 19, 2024 trade-press report, citing a Utah newspaper, stated that three separate Utah lawsuits by investors, including dozens of physicians and some state lawmakers, sought a combined $40 million from Steward, alleging that the health system took funding from its five Utah hospitals to pay bills in other states; the suits followed Steward's 2023 sale of the hospitals to CommonSpirit Health. The same report stated that 12 mostly Utah-based businesses had sued Steward over the previous year for a combined $3.4 million for goods and services such as staffing, snow removal, pest control and medical supplies, that the state of Utah was demanding $316,000 for newborn testing kits, and that the hospitals' previous owner, IASIS, was also mentioned in the lawsuits. These are the plaintiffs' claims as summarized by the trade press, not court findings, and no ruling is recorded in the reviewed material. Steward said it had no comment on the Utah lawsuits at that time. ³

analysisAccording to an August 28, 2025 trade-press report citing a Utah newspaper and court filings, Judge Patrick Corum of Utah's Third District Court ordered Steward Health Care to pay $951 million to a family after finding it liable for medical malpractice for birth injuries in a 2019 delivery at its former Jordan Valley Medical Center in West Valley City; the family, a private party that is not named, sued in 2021, and the award was described as the largest in Utah's history. Steward denied the lawsuit's allegations in May 2024 and then withdrew from the case and stopped participating; the judge said the award might have been higher had it not withdrawn. The report gave Steward 90 days from August 8, 2025 to appeal; no appeal is recorded in the reviewed material, and the report said it remained uncertain whether the family could collect, given Steward's bankruptcy. ⁴

analysisIn a complaint dated May 5, 2017 in the Suffolk Superior Court (Massachusetts), Compass Medical, P.C. sued Steward Medical Group, Inc. (SMG), a group of about 700 physicians in Massachusetts and New Hampshire, alleging breaches of a Provider and Management Service Agreement of November 29, 2011, including withholding of incentive payments since October 2014, over $500,000 in subtenant rents and $900,000 in equipment lease payments, as well as fraud and unfair practices under M.G.L. c. 93A, the Massachusetts consumer protection statute; it claimed damages in excess of $20,000,000.00 and sought trebling. According to the complaint, SMG stated that it refused to make the incentive payments because, under its accounting analysis, they would violate the so-called Fraud and Abuse Laws by exceeding the fair-market value of the services Compass rendered. According to a June 1, 2023 newspaper report, a jury in Suffolk County Superior Court sided with SMG after a 15-day trial in fall 2022 and found Compass liable for fraud; $16.4 million was owed to SMG, but after Compass announced the closure of all its facilities, Steward's trial counsel said it was unclear who would pay. A spokesperson for Compass Medical declined to comment on the lawsuit and settlement, according to the report. A June 1, 2023 television news report said Compass had not paid any part of the judgment; a Steward spokesperson said it had not been paid and had no impact on Compass's closure, adding that Steward “has no role or responsibility in the financial management or operations of Compass.” Post-trial proceedings and any appeal are not recorded in the reviewed material. ^{5 6 7}

analysisIn their July 15, 2025 adversary complaint, the debtors allege that Steward was insolvent by or before 2016: its total liabilities exceeded total assets by more than $1.2 billion at the end of 2019 (printed in the complaint as “$1.2 4 billion”) and by over $1.54 billion at the end of 2020; for 2021 the company reported an accumulated members' deficit of $1.999 billion, a working-capital deficit of $762.6 million and operating losses of $182.2 million; and an independent going-concern assessment showed for 2022 a deficit of $2.2 billion, a working-capital deficit of $1.5 billion and operating losses of $266 million. The complaint further alleges that Steward Health Care System LLC's liabilities exceeded its assets by a ratio of 1.42 at year-end 2020 and 1.35 at year-end 2021, that it had a 2020 net loss of over $395 million, and that it was failing to pay its debts as they came due: accounts payable and accrued expenses rose by over 24% ($192 million) from year-end 2019 to year-end 2020, to over $988 million, while revenue fell by about 20%. Another paragraph of the complaint puts the end-2020 excess of liabilities at “nearly $1.4 billion”, and the audited 2020 statements report an accumulated members' deficit of $1.524 billion. These are allegations on which no court had ruled as of October 2026. Cerberus stated on September 19, 2024 that Steward ended 2020 with access to more than $650 million of total liquidity, including more than $400 million of cash, and that Steward was at all times solvent during its ownership. The former CEO's website states that a third-party valuation obtained around the time of the 2021 dividend “confirms Steward retained significant value far in excess of the dividend.” The proceeding (No. 25-03593) remained pending: in November 2025 the trustee of the creditors' litigation trust announced a $3.4 billion suit in it against the former CEO and other Steward insiders, the docket shows the defendants filing a proposed discovery schedule on July 1, 2026, and a July 30, 2026 newspaper report described the case as ongoing. ^{1 2 3 4 5 6 7}