Cerberus Quadruples Cash After Uncommon Exit From Catholic Hospitals

Cerberus Capital ManagementRecords show that Wall Street made approximately $ 800 million in profit from its investment in Catholic hospitals.

The New York-based private equity firm has quadrupled its money over a decade this month, according to internal documents and a federal filing.

Cerberus was co-founded by billionaire Stephen Feinberg and carried out an unusual exit. The remaining interest has been shifted to doctors working in the hospital society rather than going public or selling to a rival.

Photographer: Jahi Chikwendiu / The Washington Post / Getty Images

Cerberus bought Caritas Christi Health Care In 2010, they paid $ 246 million in cash for hospitals in Massachusetts, which included the flagship St. Elizabeth’s Medical Center in Boston. The company that founded Cerberus Steward Health Care, expanded into a large hospital chain, as it was also burdened with a high debt burden.

Private equity firms that said they are bringing business efficiency to an obsolete industry reached $ 288 billion Health agreement in the past five years according to a report from the advisor Bain & Co..

Such investments have been vetted by members of Congress, consumer groups, and academics who say corporate use of debt puts pressure on medical providers to cut costs and affects quality.

Dr. Wall street

Private equity firms are heavily involved in healthcare

Source: Bain & Co.

In a statement, a Cerberus spokesperson said its collaboration with Steward enabled $ 800 million to be spent on infrastructure, technology and top staff, and helped restructure failing hospitals and transform them into a “world-class responsible care organization.”

Legislators have too questions raised through private equity hospitals Receive tax money during the pandemic because they could get help from their investors instead. PE firms said they have a duty to act in the best interests of customers. The federal government provided stewards altogether $ 675 million Bloomberg reported on grants and loans in September.

Steward’s current and former employees complained of staff shortages and supply bottlenecks, and a government agency gave the company the lowest ranking for solvency, Bloomberg Businessweek reported in August.

Read Businessweek: Life and Debt in a Private Equity Hospital

stewardThe Dallas-based company has improved its care and has plenty of cash to meet its obligations. The company currently serves 34 hospitals in nine states as well as five in Malta and Colombia and an extensive network of medical practices.

In the deal, Cerberus made its money through a series of complicated transactions involving a public real estate company called Call Medical Properties Trustbased in Birmingham, Alabama.

In 2016, Cerberus made most of its money selling valuable hospital properties to the Real Estate Investment Trust, which then leased them back to the hospitals. This transaction enabled Cerberus to generate hundreds of millions in dividends for its investors. The Medical Properties Trust ultimately had a nearly 10% stake in Steward.

In May 2020, Cerberus took a first step towards its exit. It transferred ownership of Steward to a group of in-house doctors in exchange for a note stating periodic interest payments that could be converted back into equity.

“Under the leadership of doctors, Steward Health Care continues to invest in the long-term health and wellbeing of our local communities,” the company said in a statement.

In January, according to a May, Steward borrowed $ 335 million from the Medical Properties Trust to buy the note from Cerberus Filing with the Securities and Exchange Commission. Cerberus said it sold the note at a discount.

Cerberus said it had timed the deal, its final exit, to ensure Steward had access to capital when needed, and that the fund’s investment was “deeply in liquidation.”

Before it’s here, it’s in the Bloomberg Terminal.