Robert Abela and Steward lock horns over agreement brokered with Muscat, Mizzi

Steward Healthcare founder and boss Ralph de la Torre locked horns with Prime Minister Robert Abela and health minister and deputy PM Chris Fearne over the future of the hospitals’ project and an agreement signed with former minister Konrad Mizzi.

The memorandum of understanding preceded a contract that was renegotiated during 2019 by amongst others, former prime minister Joseph Muscat and Mizzi, but never formally signed because of the political crisis that saw Muscat resign.

MaltaToday is informed that de la Torre was accompanied by a representative of the United States embassy in talks with Abela and Fearne.

The American healthcare company, which stepped in to buy the mysterious Vitals Global Healthcare in December 2017, is insisting on a new contract that gives them more money to run the three state hospitals – up to €120 million annually, according to sources – and wider berth on default clauses.

The negotiations with Muscat at Castille was to ensure Steward is provided extra finance to be able to continue operations while in Malta. The first major change is that Steward wants to extend its transition period to 31 July 2023.

Muscat at the time was also facing threats of resignation of Chris Fearne on the memorandum of understanding.

But the Maltese government is also exposed to a new kind of risk on the Steward hospitals’ concession: information received by a magistrate carrying out an inquiry into the controversial public-private partnership, revealed an “escape clause” that would turn any termination of the Steward concession into a government default.

In the agreement signed by Mizzi and Steward Healthcare, the government agreed that should the hospitals’ concession be terminated by a court of law – for whatever reason, and even if Steward is in breach of contract – such an event would be a government default.

That would mean that all debts incurred by Steward would be passed on to the government, and the American company would still be liable for a €100 million contractual pay-out for its equity.

The agreement is part of a loan guarantee for a €28 million Bank of Valletta loan to Steward and its subsidiaries. Apart from placing the hospital lands under Steward’s control as guarantees for the debt, the agreement gives Steward unprecedented generosity by accepting that should the concession be rescinded by any law, public order or decision, judgement or decree – effectively any government or court decision – such an event will be “a non-rectifiable government of Malta event or default”.

This could imply that the government has no wriggle room should Steward be found in breach of the concession by any tribunal: the decision will instantly trigger an obligation on government to pay out €100 million in cold cash, and take on any lenders’ debt, such as these BOV loans.

But should Steward default on the contract and not fulfil its obligations on the St Luke’s, Karin Grech, and Gozo hospitals, it would ‘only’ lose its equity – the investment it carried out during the PPP – although government would still have to pay the debt they incurred.

Together with Muscat, in November 2019 Steward was close to extending the grounds on which a ‘force majeure’ or national emergency default might incur, that is, situations where civil strife or war would make the operation unworkable. In such case, government would be obliged to pay Steward 50% of its equity, but also cover any debt the company incurred.

But Steward wanted to add a host of other such ‘force majeure’ conditions, such as accidental loss or damage, strikes and work-to-rule situations, and even changes in laws such as those affected by EU regulations all situations that tend to affect the ordinary running of any business.

Sources in the civil service have told MaltaToday that the Boston healthcare company never underwrote any guarantee on Steward Malta’s commitments to deliver on its contract – a situation that could put the company in default.

And yet, Steward had proposed to Mizzi that it transfer its concession on the Barts campus at the Gozo hospital to Medical Properties Trust, one of the American shareholders in Steward Health Care in Boston. MPT, a real estate firm, would then use the transfer to raise funds for Steward Malta, and then ‘rent back’ the lands concession to Steward.