Diversified Healthcare Trust Defaults On $450M Credit Facility

Doctors office, stethoscope, medical office buildings, MOB

Diversified Healthcare Trust has defaulted on a $450M credit facility. The news comes soon after the company said that there is “substantial doubt regarding DHC’s ability to continue as a going concern” because of debt.

The latest default isn't a matter of payments, the company said, but rather because of a drop in the aggregate appraised value of collateral properties. The terms of the facility specify that the collateral must have a total value of at least $1.09B, a value that the facility's administrative agent periodically reviews.

Last week, the agent determined that the collateral securing the facility — 61 medical office and life sciences properties — had dropped from $1.34B to $1.05B, below the required threshold.

DHC said it is negotiating a limited waiver with its lenders under the facility through Sept. 30, the outside closing date for its pending merger with Office Properties Income Trust. At that time, DHC’s $450M credit facility will be fully refinanced, the company said.

The REIT, which specializes in senior housing, medical office and life sciences, and is in the process of merging with OPI, said the merger should go forward as an alternative to going out of business.

Because DHC is otherwise behind on its debt, the company cannot issue any new debt or refinance expiring debt. Previously, DHC said it believes the earliest it may be current on its debt is midyear 2024, which is after $700M of indebtedness comes due in the first half of 2024.

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