Sam Bankman-Fried Is Not Entirely Wrong

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FTX’s victims are getting up to 143 percent of their money back, because the system treated it like the fraud it was. As the Steward case shows, that’s not usually how bankruptcy works.

BY MAUREEN TKACIK MAY 13, 2024

In February, the Steward hospital chain was at the lowest point of a decade-long downward spiral. The Centers for Medicare & Medicaid Services was threatening to shut down its Louisiana hospital over standards of care a Republican state rep described in a hearing as “cruelty.” Boston Globe columnist Brian McGrory had spent much of the winter detailing the yachts and private jets enjoyed by founder Ralph de la Torre. Creditors were threatening to sue to force the company into Chapter 7 liquidation, and Steward’s own defense attorneys began abandoning ship. Tony investment bank Lazard Frères contacted 14 lenders hoping to get an offer for some kind of financing deal, and all 14 refused. On February 16, a credit industry reporter even broke the news that Steward was about to file for bankruptcy protection.

But at the end of the month, another bridge loan finally came through, courtesy of two shadowy lenders: a Cayman Islands–based business loan shark called Chamberlain Commercial Funding, and the low-profile distressed-debt investor Sound Point Capital. A few of the more vociferous creditors were paid off. Heart valves and needles came in at some hospitals, and surgeons were allowed to schedule elective surgeries again—though so many of Steward’s admin staffers had been furloughed, they often had to call the patients themselves.

Last week, when Steward finally filed for Chapter 11 bankruptcy protection in Houston, the company was forced to disclose to its thousands of creditors how much it had paid for those seven extra weeks of life: an annualized guaranteed interest rate of 255 percent, plus a senior claim on an unspecified portfolio of real estate, in addition to all its accounts receivable.

https://prospect.org/health/2024-05-13-sam-bankman-fried-not-wrong-steward-health-bankruptcy/