Office Properties Income Trust’s bankruptcy proceedings are off to a contentious start.
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A judge ordered the REIT to pursue mediation with its noteholders owed up to $400M during a Monday hearing, Bloomberg reported.
This came after hours of argument about whether the company, managed by The RMR Group, was favoring one group of noteholders over another in its effort to shed $1B of debt.
One group of creditors, including Point72 Global Macro Investments and Taconic Capital Advisors, is willing to trade some of its debt for equity and to lend the company $125M, according to Bloomberg.
That faction owns roughly 80% of the $610M worth of notes due in 2029. The plan is opposed by an unnamed group of investors that holds notes due in 2027.
The main question is whether the 2027 noteholders sent a default notice to OPI before the REIT filed for bankruptcy in Texas on Thursday.
OPI has filed a lawsuit requesting that Judge Christopher Lopez rule that the notice came in after that date. If it is successful, the interest rate on the 2027 notes will be 3% instead of 12%.
Lopez approved a $10M loan to help OPI continue operating and respond to potential litigation. He requested that the parties resolve their disagreements ahead of a hearing scheduled for early next month.
OPI’s bankruptcy filing followed reports of financial distress, which began circulating over the summer. The company was delisted from the Nasdaq Stock Market last month after failing to stay above the required share price threshold.
The REIT's biggest tenant is the federal government, making up 17% of its leases, and that sector has struggled amid the Trump administration’s efforts to shrink the federal bureaucracy’s physical footprint.
“We expect no disruptions to our business or properties during the pendency of the proceedings and expect OPI to emerge as a more stable and financially flexible company, well positioned to advance its strategic initiatives,” OPI Chief Operating Officer Yael Duffy said in a Thursday statement after it filed for bankruptcy.
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