TRACO International Group S de RL filed a complaint today (6 December) against Steward Health Care System LLC, accusing the company of failing to pay USD 3.5m in monthly premiums and withholding USD 72m in sale proceeds.

In the complaint, filed in the US Bankruptcy Court for the Southern District of Texas, TRACO specifically alleged that Steward engaged in financial mismanagement and breached its fiduciary duty in its Chapter 11 case.

TRACO, a non-debtor affiliate and subsidiary of Steward, provides insurance coverage, including medical malpractice policies for Steward’s hospitals and healthcare professionals. Despite court orders authorizing payment of these premiums – totaling approximately USD 3.5m per month – TRACO alleges that Steward has failed to make any payments for 2024.

TRACO also seeks USD 72m in proceeds from TRACO’s 2023 equity sale in Davis Hospital and Medical Center LP. TRACO asserts that these funds, which it claims are exclusively its property, remain improperly withheld by Steward. Also, TRACO alleged it is entitled to proceeds from the 2024 sale of Odessa Regional Hospital LP, where it holds a 12.36% equity stake. Despite multiple requests, TRACO said Steward has neither returned the Davis sale funds nor provided an accounting of the Odessa sale proceeds.

In its complaint, TRACO accused Steward of breaching its fiduciary duty by retaining funds that belong to the company and failing to prioritize the best interests of its affiliate. The company argued that these actions constitute financial mismanagement and disregard Steward’s responsibilities under applicable law and court-approved orders.

In its filing, TRACO requests immediate turnover of the USD 72m from the Davis Hospital sale and any proceeds from the Odessa sale; payment of overdue insurance premiums; a full accounting of the Odessa sale proceeds; and pre- and post-judgment interest.

Steward filed for Chapter 11 bankruptcy on 6 May, citing financial challenges stemming from rising operational costs, declining revenue from elective procedures and reduced reimbursement rates. The hospital also faced post-pandemic increases in labor expenses and pressure from Massachusetts authorities to secure new operators for its facilities.