Office Properties Income Trust credit rating downgraded over proposed debt exchange: S&P Global

Investing.com -- S&P Global has downgraded the issuer credit rating of Newton, Mass.-based REIT Office Properties Income Trust (NASDAQ:OPI) to ’CC’ from ’ CCC (WA:CCCP)’. The downgrade is due to a proposed debt exchange offer that the company announced. OPI is offering its existing 2026, 2027, and 2031 noteholders the option to exchange their outstanding senior unsecured notes for up to $175 million of new senior priority guaranteed unsecured notes due 2030.

The proposed transaction is viewed as a distressed exchange by S&P Global because investors would receive less than what was initially promised. If this transaction is completed, it will be treated as a default. S&P Global also lowered its issue-level ratings on OPI’s senior unsecured notes due 2026, 2027, and 2031, which are part of the proposed exchange, to ’CC’ from ’CCC-’.

However, the ratings on the company’s senior unsecured notes due 2050, which are not part of the proposed exchange, have been affirmed at ’CCC-’. The ’B-’ issue-level ratings on the existing secured notes due March 2029 and March 2027, and the ‘CCC’ issue-level rating on the existing secured notes due September 2029, have also been affirmed. The recovery ratings remain unchanged.

S&P Global has indicated a negative outlook for OPI, stating that they will further lower the issuer credit rating to ’SD’ (selective default) upon the completion of the distressed exchange.

OPI has proposed the exchange of outstanding notes at below par for up to $175 million of new 8% senior priority guaranteed unsecured notes due 2030. This exchange could potentially reduce the company’s leverage. However, if completed, it would be viewed as a selective default because lenders would likely receive less than what was initially promised.

OPI’s current debt obligations include $425 million outstanding on its secured credit facility due January 2027, $1.96 billion of secured fixed-rate debt, and $497.6 million of unsecured notes. Of the unsecured notes, $335.6 million would be included in the contemplated exchange.

The company’s existing senior unsecured notes due 2050 and senior secured notes are not part of the exchange offer. As a result, the ratings on these issues remain unaffected by the proposed transaction. The negative outlook suggests that S&P Global will likely lower the issuer credit rating on OPI to ’SD’ and the issue-level ratings on the affected senior unsecured notes to ’D’ upon the completion of the exchange offer.

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