US bankruptcy court approves global bidding procedures for Steward Healthcare assets

June 18, 2024
Business Affairs
By Robert J. Kerwin

On Monday, June 3, 2024, the U.S. Bankruptcy Court handling the Steward Healthcare bankruptcy approved bidding procedures in connection with the sale of all Steward Healthcare assets including its hospitals. Earlier this month, Steward, which had been mired in financial problems, filed a petition for Chapter 11 relief in the U.S. Bankruptcy Court in Houston.

The Steward Healthcare bankruptcy debtor was authorized by the court to use a marketing and sale process including, pursuant to one or more auctions. This was accomplished in a court order (and accompanying "Global Bidding Procedures" document spanning 74 pages). The order and other relevant documents are accessible via the financial advisory firm Kroll, which has been designated as the prime clerk for the bankruptcy.

The proposed sale of assets will take place in a series of rounds with a first round bidding deadline of June 24, 2024 and a second round deadline of August 12, 2024. Hearings as to the outcomes have been scheduled for July 11 and August 22, respectively. The first round refers to all of Steward’s hospitals except for those in Florida and four hospitals in Texas, which will be in the second round. Bidders have been authorized to submit bids for one or more of the Steward assets.

To participate in the diligence process and receive access to due diligence information, interested parties must submit to Steward or their advisors (i) an executed confidentiality agreement in form and substance satisfactory, (ii) a statement and other factual support demonstrating that the party has a bona fide interest in purchasing certain assets (iii) a description of the nature and extent of the due diligence the interested party wishes to conduct and (iv) sufficient information (as determined by Steward and its advisors) that the interested party has the financial wherewithal and internal corporate, legal or other authorizations to close a sale of the transaction. Potential bidders are prohibited, absent approval of Steward and its advisors, from jointly participating in a potential sale transaction or communicating with each other to share or discuss confidential information.

It's possible these procedures were put in place in light of the broad outreach by Steward’s investment advisors to potential buyers prior to the bankruptcy filing. Though this outreach was made to 40 potential buyers, (as detailed in one of the declarations made in the bankruptcy) and although four parties submitted nonbinding indications of interest, one party was subsequently determined to have the highest interest.

Robert J. Kerwin
In the declaration of Toby King a senior manager of investment banking at Leerink Partners, he stated that an indication of interest was submitted by Optum Inc., a subsidiary of UnitedHealth Group. It remains to be seen whether United or its subsidiaries or another party will be the winning "qualified" bidder for one or more of the rounds, particularly as the U.S. Department of Justice has voiced in the bankruptcy that an acquisition of Steward Health Care assets must receive an antitrust review.

About the author: Robert J. Kerwin is the general counsel for IAMERS, the International Association of Medical Equipment Remarketers and Servicers.

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