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Hospital Filing Has Regulators On Edge; Office Meltdown Comes For Trump
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Good day and welcome to WSJ Pro Bankruptcy's Daily Briefing. It's Tuesday, May 7. In today's briefing, Steward Health Care System's bankruptcy filing has fueled concerns about quality of service and patient care. Separately, we look at the 2020 buyout deal for Steward as new details about its structure and purpose come to light. And the meltdown in the commercial-property market is hitting one of the crown jewels of Donald Trump's portfolio.
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EMIL LENDOF/THE WALL STREET JOURNAL, ISTOCK
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Steward bankruptcy puts regulators on alert for shutdowns. Hospitals in eight states are at risk of running out of cash after their owner filed for bankruptcy, potentially pitting the chain’s creditors against regulators, who raced to address concerns about safety.
Steward Health Care System became one of the largest hospital bankruptcies in decades when it filed for chapter 11 Monday. The chain, which operates 30 hospitals, has been in dire financial straits for months, failing to pay bills and burning through emergency loans from hospital landlord Medical Properties Trust. Regulators will often join the fray in hospital cases with demands to protect public health, which can conflict with interests of creditors.
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The private-equity deal that flattened Steward. Cerberus Capital Management wanted to sell out of its stake in Steward, so it convinced the hospital’s landlord to put up the cash. The 2020 transaction paved the way for Cerberus to lock in an eventual $800 million profit. It was only in recent weeks, as congressional inquiries unearthed new revelations about Steward’s finances, that the details and overarching purpose of the deal became known.
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Like thousands of other U.S. office buildings, 40 Wall St. is now under duress because of weakening office demand. PHOTO: ROY ROCHLIN/GETTY IMAGES
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The office-market meltdown comes for Trump’s prized Wall Street building. Donald Trump’s prized Manhattan office tower at 40 Wall St. is getting swept up by the worst storm to hit the office market since the global financial crisis.
Like thousands of other U.S. office buildings, 40 Wall is now under duress because of weakening office demand. The tower’s vacancy rate has risen to 21%, compared with about 5% in 2015. Trump faces a bigger reckoning for the building next year, when its $120.5 million mortgage matures in July.
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Battery cells at Ambri. The company develops batteries based on liquid metal technology developed at MIT by chemistry professor Donald Sadoway.
PHOTO: ALLISON DINNER FOR THE WALL STREET JOURNAL
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Battery maker backed by Bill Gates files bankruptcy. Liquid metal battery developer Ambri has filed for bankruptcy, blaming a challenging fundraising environment and disputes with a landlord and construction contractor.
The Marlborough, Mass.-based company, which is trying to develop batteries that cost less and are more environmentally friendly, said an existing group of bondholders, including Microsoft founder Bill Gates and Paulson & Co., have agreed to serve as lead bidder in a sale process.
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Video AI startup files for bankruptcy. StoryFile, a startup that creates artificial intelligence-powered videos that talk back, has filed for bankruptcy.
The White Plains, N.Y.-based company, which on its website homepage features an interactive AI-powered video with actor William Shatner, sought protection from creditors Sunday in the U.S. Bankruptcy Court in the Southern District of New York. It listed $1.5 million in assets and $10.5 million in liabilities.
"Despite additional fundraising and new revenue streams, StoryFile continued to hemorrhage cash,” interim chief executive and shareholder, James Fong, said in a sworn declaration. Increased accounts payables and loan debt also have contributed to “insurmountable financial strain,” prompting StoryFile to file for chapter 11, he said.
StoreFile's website says its technology allows future generations to ask questions and interact with past generations. StoryFile still sees growth opportunities and hopes to reorganize during bankruptcy, Fong said.
–Becky Yerak
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Small business chapter 11 filings rise. The number of small businesses filing for chapter 11 bankruptcy in April rose 60% from the same month a year ago as struggles continued with inflation and high interest rates.
The increase also came as a favorable provision in subchapter V of chapter 11 is due to expire in June. “Everyone is trying to get in while they can,” bankruptcy lawyer David Mawhinney said.
The 233 small businesses filing last month under subchapter V included St. Cloud, Minn.-based bankruptcy law firm LifeBack Law; Fargo, N.D.-based beer maker Fargo Brewing; and Lincoln, Neb.-based calzone seller Midwest Dough Guys. Data provider Epiq AACER expects filings to keep rising in coming months.
Originally, small businesses needed less than roughly $2.7 million in debt to file under subchapter V, a speedier and less costly bankruptcy process. But, in response to the distress caused by the Covid-19 pandemic, Congress authorized a temporary increase in eligibility to $7.5 million.
That higher limit is due to revert back next month unless Congress acts. Last month, a bipartisan group of U.S. senators introduced legislation that would extend the higher limit by another two years. –Becky Yerak
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