The US Justice Department is objecting to a proposed timetable that would enable bankrupt Steward Health Care to wrap up its sale of its nationwide doctors network by July 2, a move that could affect Steward’s ability to raise new money from a lender as it unwinds its assets.
In a new bankruptcy court filing, Brian Boynton, principal deputy attorney general, said the aggressive timetable outlined in a financing deal Steward struck with its landlord this month leaves “inadequate time for compliance” with the Justice Department’s pending antitrust review of Steward’s proposal sale of the doctors group to Optum.
“To the extent the [financing deal] interferes with the debtor’s obligation to comply with the United States’ antitrust review, it should not be approved,” Boynton wrote in the bankruptcy filing.
Judge Christopher M. Lopez is expected to rule on the Justice Department’s objection at a hearing Monday at the US Bankruptcy Court for the Southern District of Texas in Houston.
At an earlier hearing, on May 7, the judge granted an interim motion requiring Dallas-based Steward, which filed for bankruptcy May 6, to establish procedures for the sale of its doctors group, called Stewardship Health, and its 31 hospitals — including eight in Massachusetts — with conditions acceptable to its lender, Medical Properties Trust.
That real estate firm, called MPT, purchased the land and buildings on which Steward’s hospitals operate in 2016 and leased them back to the for-profit hospital system in a $1.2 billion sales-leaseback deal. In 2022, MPT sold Steward’s hospital properties in Massachusetts to a 50-50 joint venture it formed with Macquarie Asset Management of Australia.
In its bankruptcy filing, Steward said it was finalizing the terms of $75 million in new financing from Alabama-based MPT and expected to receive an additional $225 million if it met unspecified conditions acceptable to the hospital landlord. The aggressive timetable for selling the doctors group and hospitals was part of those conditions.
That timetable, laid out in a bid procedures motion, calls for potential buyers of Stewardship Health to submit bids by June 24, an auction to be conducted on June 27, and a sales hearing to be held July 2.
Optum, an arm of health care conglomerate UnitedHealth, signed a letter of intent on March 19 to buy Stewardship Health, which includes Steward’s primary care and other clinicians and its physicians contracting network in seven states. But when it filed for bankruptcy on May 6, the court required that it conduct auctions to sell assets.
In a bid procedures motion, Steward said it hoped to announce Optum as a so-called stalking horse bidder to “provide a floor value and maximize the value of the Stewardship assets.” A stalking horse bidder gets certain financial incentives, including a termination fee if the asset is sold to a competing bidder. But so far, Steward and UnitedHealth, the Optum parent company, have been unable to reach an agreement.
A spokeswoman for Steward declined to comment on the Justice Department’s objection to its proposed timetable. Representatives of Optum and MPT didn’t immediately respond to inquiries.
Ross Martin, a professor at Boston College Law School, said it wasn’t clear whether a delay in the Stewardship sale would affect Steward’s ability to raise further capital during the bankruptcy proceeding. He noted that MPT has an interest in getting the hospitals sold so it can continue collecting rent from new operators, so it may have to be patient.
“The proposed dates often move in these bankruptcy cases, and they’re subject to negotiations,” said Martin, who practiced bankruptcy law for two decades in Boston and New York. “It wouldn’t be uncommon for the timetable to be pushed back a week or two in a case like this.”
Even if Optum agrees to be a stalking horse and the bankruptcy judge allows Steward to move forward with its timetable for selling the doctors group, a deal with Optum — which could provide Steward with cash to pay off lenders and creditors — can’t be completed until the Justice Department finishes its antitrust review, according to Boynton’s filing.
“The debtors can not consummate a sale until the review concludes,” he wrote.
Robert Weisman can be reached at robert.weisman@globe.com.