11/01/22 12:04 PM EDT

THE (DIS)TRUST SERIES | VOLUME XXII | PIPELINE UNSECURED CREDITOR OBJECTION | 11.1.22 (MPW)

Rob Simone, CFA

@HedgeyeREITs

Takeaway: Unsecured creditor in Pipeline BK files objection to Disclosure Statement w/ useful additional info

Hedgeye Cartoon of the Day: Getting Longer...

Ticker: MPW

Company Name: Active Short Medical Properties (Dis)Trust

Subsector: NNN Hospitals

Headline: Unsecured creditor Pulmonary Exchange, Ltd. objects to Disclosure Statement filed by Pipeline

Note: Since the company made it pretty clear on the 3Q22 call that it does not intend to keep investors apprised of the Pipeline BK situation, we will try our best to do so.

Headline: On 10.28.22 Pulmonary Exchange, Ltd. objected to the Disclosure Statement filed by the Debtors as not complying with 11 U.S.C. It further requested the court deny the approval of the Disclosure Statement. The objection by Pulmonary at least calls into question MPW's narrative that the Chicago hospitals are the only problem, the reasons for the filing in general, and MPW's underwriting/decision making in funding into this situation in 2021. Furthermore, in our view the objections are relevant given that Deerfield is effectively "playing both sides" as >70% equity owner of Pipeline as well as the DIP lender. On a related note, Deerfield was the original sponsor behind what is now CMAX which is buying Steward Health's VBC business.

Pulmonary's Position:

Pulmonary Exchange, Ltd. is the holder of an unsecured claim in the amount of $751,759.80. Pulmonary objects to the "ghosting" of their claim, i.e. the proposal to deliver Pulmonary no recovery which Pulmonary contends is buried in the statement and not readily apparent to creditors.
Pulmonary claims the Disclosure Statement fails to include sufficient information to analyze the Plan of Reorganization by Pipeline Health Systems, LLC - specifically it contains no liquidation analysis, no feasibility analysis, and no description of Pipeline's available assets or liabilities.
Furthermore, Pulmonary contends that Pipeline fails to adequately describe the issues resulting in the BK filing. Specifically while Pipeline attempts to attribute the financial difficulty to COVID and the related disruption, Pulmonary notes that Pipeline was "losing money for some time prior to COVID. The underlying loss of money should be laid out in greater detail so creditors and parties in interest can analyze whether the Debtor's Plan will in fact address the issues leading to the filing of the bankruptcy petition..."
The Disclosure Statement fails to describe the "available assets and their value" and does not contain an appraisal.
Debtors have not filed BK schedules yet (due 11.10.22, or three days after the hearing on the Disclosure Statement), so creditors do not have any information regarding the sources of their potential recovery.
The creditor matrix is only three pages long and does not include Pulmonary.
The Disclosure Statement does not disclose the accounting methods utilized or the accountants responsible. Pulmonary "believes it is likely the financial information exists, but it has not been disclosed..."
"The Bankruptcy Rules require twenty-eight days' notice to parties in interest of the hearing to consider approval of a disclosure statement," yet the current hearing date is 11.7.22.
"It appears likely... that, were the Illinois Facilities to be sold..., that there would be enough cash generated to pay creditors of the Illinois Facilities (of which Pulmonary Exchange is one) but for the Proposed Plan."