Proton International

UMB Bank N.A., as bond trustee, has sued the Public Finance Authority and managers of a bond-financed cancer treatment center, seeking receivership and foreclosure of the Florida property.

Processing Content

Financed with $81.3 million of unrated tax-exempt debt in 2017, the PFA-owned proton therapy center has struggled for years. It began reporting events of default on the trust indenture in 2021 and has been in monetary default since 2024, according to the complaint, filed in the 15th Judicial Circuit Court for Palm Beach County, Fla.

The uncured defaults allow UMB to seek foreclosure on the mortgage lien, the complaint said.

It’s the second lawsuit UMB has filed against the Wisconsin-based PFA this year. In March, the bond trustee sued the authority and managers of a drug treatment facility for bad management, asking for receivership. The court denied the request and the judge is now considering the manager’s partial motion to dismiss.

Proton centers are a niche part of the healthcare sector often financed with speculative-grade bonds that has struggled to become profitable. Proton therapy more precisely targets radiation to tumors, with less damage to surrounding tissues than other radiation therapies. The treatment is costly, not always covered by insurance, and has not gained widespread acceptance. The centers rely on patient revenue for bond payments and many have struggled to build volume, especially in the wake of the COVID-19 pandemic.

UMB’s lawsuit seeks to take over the leasehold interest on the proton therapy center, which includes two linear accelerators, offices, exam rooms, and related equipment and also seeks appointment of a receiver to oversee the sale of the property and assets, with the proceeds distributed to bondholders.

A receiver is also needed to oversee a move of the “sensitive and highly-regulated” radiation equipment, UMB said.

The bond trustee “reasonably believes that the value of the project, the facility and the mortgaged property is insufficient to satisfy the indebtedness under the indenture and bonds, and that the value of the collateral will further decline absent the immediate appointment of a receiver,” UMB said.

Greenberg Traurig PA is acting as UMB’s lawyer.

In addition to the PFA, the lawsuit names as defendants Tenet Healthcare Corp., the facility’s landlord’ Proton International LLC – Delray LLC, the facility’s operator; and Varian Medical Systems, which provides the equipment.

The PFA owns the Delray Beach center as part of its asset ownership program. The authority owns four proton centers in total, all of which are in distress or default.

“You’ll find especially on the four proton centers that PFA owns that there are struggles and the reasons behind those struggles are varied, but there’s no running from that,”  Andy Phillips, attorney for the Public Finance Authority, told The Bond Buyer in a previous interview. “We relied on financial professionals to say whether they’re credit worthy or not. The numbers didn’t pan out.”

The PFA in 2017 privately placed the bonds to finance the acquisition, construction and equipping of a radiation therapy treatment center in Delray Beach, Fla. Proceeds also financed reserve funds and working capital, according to the complaint, which UMB posted attached to a July 21 notice of litigation posted on the Electronic Municipal Market Access website.

The borrowing included $67.3 million of senior bonds and $14 million of subordinate bonds. Coupons ranged from 5.75% to 8.5% with a 2046 final maturity. Most of the bonds haven’t traded since 2017 although some of the senior bonds traded in 2021 for 107.8.

The bonds are secured by a leasehold mortgage, project revenues, and a pledge of related collateral and contract rights assigned to the trustee under the Indenture and related bond documents, according to the complaint. The ground lease only allows the project to be used for operation of a radiation therapy treatment center.

The PFA’s other cancer treatment centers include the Maryland Proton Center, which is the largest, and the oldest, with roughly $413 million of outstanding debt, per a recent audit. It has been in default for years, most recently missing its July 1 interest payment. It also owns New Jersey-based ProCure Proton Therapy Center, with roughly $146 million of debt and the now-closed University of Alabama at Birmingham Proton Center, also with $81.3 million of debt.

UMB and PFA declined to comment.