Prospect hospitals’ landlord agrees help speed up bankruptcy sale

CT Insider – Saturday, March 1, 2025
By Liese Klein

The three Connecticut hospitals owned by bankrupt Prospect Medical Holdings got a boost this week in their efforts to be sold to a new operator: any future deal could include the land the hospitals sit on.

Prospect signed a non-binding agreement with its landlord, Medical Properties Trust, to secure the option of bundling the hospitals and land when selling Waterbury, Manchester Memorial and Rockville General hospitals, according to bankruptcy court filings. MPT said it agreed to the deal to help Prospect sell the hospitals as soon as possible.

MPT announced the new settlement with Prospect, referred to as a “term sheet,” in a news release Thursday on the company’s most recent financial results. A judge must approve the settlement, with the next hearing in the bankruptcy case scheduled for March 6.

“In a short time, we reached a global settlement agreement that will allow Prospect to more effectively market and sell its hospitals along with the related real estate and avoid the delays, uncertainty and cost of a prolonged litigation,” MPT CEO Edward K. Aldag said on the company’s earnings call.

The settlement between Prospect and MPT will avoid lengthy court battles, speeding the hospital sales and allowing the hospitals to continue operating without interruption, the parties said in their court filing. MPT also agreed to provide $25 million in new funding to help Prospect expedite the sales.

MPT’s stock price soared on the news, despite a 289.5% drop in fourth-quarter revenue compared to the same period last year. After unwinding its investments in Prospect and another troubled hospital operator, Steward Health, the company is poised for growth, analysts said.

“We believe this restructuring process will position us for enhanced recoveries,” Aldag said of the Prospect settlement.

Sale-leaseback added to CT hospitals’ financial woes

Prospect sold the land under its hospitals to MPT in 2019 as part of a sale-leaseback transaction, but stopped paying rent to its new landlord soon after the deal was struck.

By 2023, Prospect owed MPT $457 million related to its Connecticut hospitals, according to a bankruptcy document the company filed in January.

Prospect also owed approximately $312 million to three hospital pension plans as of Nov. 30, according to the filing. The federal Pension Benefit Guaranty Corporation filed liens last year against Prospect for $4 million owed to employees in an Eastern Connecticut Health Network pension plan.

As part of the ongoing bankruptcy case, Prospect’s Connecticut hospitals could also be sold apart from the land with new leases, MPT executives said on Thursday.

“This may include sales of hospital real estate and operations together, sales of operations and real estate separately, sales of operations and a new MPT lease, some combination of these,” MPT Chief Financial Officer R. Steven Hamner said in the earnings call.

Yale New Haven Health, which signed a deal to pay $435 million for the three hospitals in 2022 before suing to back out of the deal last year, declined to comment on the MPT pact. The New Haven-based system said this week that a deal with Prospect was “impossible” under the current conditions.

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