Office Properties Income Trust Announces Additional Amendments to Private Exchange Offers Relating to Existing Unsecured Senior Notes
Office Properties Income Trust (Nasdaq: OPI) announced amendments to its private exchange offers for existing unsecured senior notes due 2025, 2026, 2027, and 2031. The amendments include updated Acceptance Priority Levels and Priority Amounts for the notes, extending the expiration time to June 10, 2024. The company will exchange the existing notes for new 9.000% Senior Secured Notes due 2029. The total amount of new notes to be issued is capped at $610 million. The offer is only available to qualified institutional buyers in the U.S. or non-U.S. persons in compliance with Regulation S. The new notes and related guarantees will not be registered under the Securities Act of 1933.
- Amendments provide clear priority levels and amounts for note exchange, giving investors transparent terms.
- Expiration time extended to June 10, 2024, allowing more time for participation.
- New notes come with a 9.000% interest rate, which may attract investors seeking higher returns.
- Total issuance of new notes capped at $610 million, limiting potential dilution.
- Existing notes not exchanged will remain outstanding, potentially leading to future financial obligations.
- New notes and related guarantees are not registered under the Securities Act, restricting their transferability and resale.
- Waiver of minimum tender conditions may indicate insufficient initial interest in the exchange offer.
- Any notes exchanged will be subject to pro-rata reduction if oversubscribed, potentially limiting returns for some investors.
Insights
The recent amendments to the private exchange offers by Office Properties Income Trust (OPI) have various critical implications for bondholders and stakeholders. The introduction of 9.000% Senior Secured Notes due 2029 in place of the existing unsecured notes significantly alters the risk profile of these investments. Secured notes tend to offer better credit protection due to the backing of specific assets of the issuer, which potentially reduces the default risk for bondholders.
This change holds particular importance given the varying Acceptance Priority Levels and Priority Amounts outlined for different series of notes. The revised priority structure ensures that holders of the 2025 notes are given precedence, which might be indicative of OPI's strategy to prioritize near-term obligations.
From a broader perspective, the extension of the expiration time until June 10, 2024 and the waiver of minimum tender conditions reflect OPI's efforts to make the exchange offer more attractive and accessible to its investors. However, the fact that the offer and sale of the new notes are not registered under the Securities Act imposes restrictions on transferability, potentially limiting their market liquidity.
While the 9.000% coupon rate is quite attractive compared to the existing notes, investors should remain mindful of the long-term financial health and cash flow capabilities of OPI, especially within the volatile commercial real estate market. The successful execution of this exchange offer can lead to reduced refinancing risks and improved debt structure, but these benefits need to be weighed against the new terms and conditions that come with senior secured status.
Analyzing OPI's amendments to their exchange offers, it's critical to note the impact on the company's credit ratings and market perception. Transitioning from unsecured to secured debt typically results in lower interest costs due to the reduced risk for lenders, which could positively influence OPI's future borrowing costs and credit ratings. This strategic move aims to enhance OPI's balance sheet stability by aligning debt maturities with cash flows.
The adjustment in Acceptance Priority Levels and related guarantees introduces a meticulous allocation mechanism designed to optimize the restructuring process. However, the pro rata basis for oversubscribed notes adds a layer of complexity that investors must understand well. This waterfall mechanism ensures that excess demand in one note series does not leave other series undersubscribed, maintaining a balanced approach to liability management.
Moreover, limiting participation to qualified institutional buyers and non-U.S. persons as per Regulation S ensures that only sophisticated investors partake, mitigating the risk of uninformed investment decisions impacting the broader market. However, this exclusivity might alienate smaller, retail investors from participating in potentially beneficial restructuring terms.
Furthermore, the extension of the exchange offer period provides additional time for bondholders to make informed decisions, reflecting OPI's commitment to transparency and investor engagement. Overall, these amendments aim to strengthen OPI's financial foundation, yet they demand a thorough understanding of the implications on debt structure and liquidity.
The Second Amended Exchange Offers (1) provide for updated Acceptance Priority Levels and Priority Amounts for Existing Notes and (2) extend the Expiration Time, but otherwise all terms and conditions remain the same as in the offering memorandum, dated as of May 1, 2024, as previously amended by OPI’s May 20, 2024 press release (collectively, the “Offering Memorandum”).
Amended Acceptance Priority Levels; Priority Amounts for Each Series
The Acceptance Priority Levels and Priority Amounts for Existing Notes are being modified as part of the Second Amended Exchange Offers. Each series of Existing Notes will take priority up to the Priority Amount of New Notes to be issued in exchange therefor as set forth in the Updated Priority Table below.
If the aggregate principal amount of Existing Notes of any series that participates in the exchange would, if fully accepted, result in the issuance of New Notes in excess of the Priority Amount for such series, then the amount of Existing Notes of such series participating in the exchange will be reduced on a pro rata basis. However, to the extent that New Notes issued in respect of any series of Existing Notes would be less than the Priority Amount for such series (the difference between the Priority Amount for such series and the New Notes issued in respect of such series, an “Undersubscribed New Notes Amount”), the Undersubscribed New Notes Amount will be allocated to holders of other series of Existing Notes, if any, that exceeded the applicable Priority Amount for such series in accordance with the assigned Acceptance Priority Levels shown in the Updated Priority Table below, with 1 being the highest and 4 being the lowest, subject to pro rata reduction.
The maximum aggregate principal amount of New Notes issued in connection with the Second Amended Exchange Offers remains
Updated Priority Table
Existing Notes to
|
|
CUSIP/ISIN |
|
Existing
|
|
“Priority
|
|
Acceptance
|
|
Exchange Consideration |
Existing 2025 Notes |
81618TAC4/US81618TAC45 |
|
|
|
|
|
1 |
|
|
|
Existing 2031 Notes |
67623CAF6/US67623CAF68 |
|
|
|
|
|
2 |
|
|
|
Existing 2027 Notes |
67623CAE9/US67623CAE93 |
|
|
|
|
|
3 |
|
|
|
Existing 2026 Notes |
67623CAD1/US67623CAD11 |
|
|
|
|
|
4 |
|
|
Illustration of Priority for Undersubscribed New Notes Amount
The following table illustrates the waterfall of claims on each of the Priority Amounts set forth in the Updated Priority Table above.
|
|
|
|
|||
Existing 2025 Notes |
Existing 2031 Notes |
Existing 2027 Notes |
Existing 2026 Notes |
|||
Existing 2031 Notes |
Existing 2025 Notes |
Existing 2025 Notes |
Existing 2025 Notes |
|||
Existing 2027 Notes |
Existing 2027 Notes |
Existing 2031 Notes |
Existing 2031 Notes |
|||
Existing 2026 Notes |
Existing 2026 Notes |
Existing 2026 Notes |
Existing 2027 Notes |
Waiver of Minimum Tender Conditions
As previously announced on May 20, 2024, OPI waived the conditions requiring (i) the tender of at least
Exchange Consideration
Under the terms of the Second Amended Exchange Offers, holders exchanging their Existing Notes remain entitled to receive the revised amounts of New Notes set forth in the Updated Priority Table, subject to pro rata reduction as described above. This consideration is the same as the Early Exchange Consideration (as defined in the offering memorandum, dated as of May 1, 2024) offered to holders who previously tendered prior to the May 14, 2024 early delivery time. Accordingly, any disclosure in the Offering Memorandum relating to the tax treatment of the Additional Early Exchange Consideration (as defined in offering memorandum, dated as of May 1, 2024) is no longer applicable.
Extension of Expiration Time
In connection with the amendments, OPI announced that the expiration time for the Second Amended Exchange Offers has been extended until 5:00 p.m.,
Exchange Participation To-Date
According to information provided by D.F. King & Co, the information and exchange agent (the “Information and Exchange Agent”), as of 9:00 a.m.,
No Registration
The offer and sale of the New Notes and related guarantees will not be registered under the Securities Act of 1933, as amended (the "Securities Act"), or any state securities laws, and the New Notes and related guarantees will therefore be subject to restrictions on transferability and resale. OPI does not intend to register the sale of any of the New Notes and related guarantees under the Securities Act or the securities laws of any other jurisdiction and is not providing registration rights. The New Notes and related guarantees may not be offered or sold in
Eligible Holders
The Second Amended Exchange Offers are being made, and the New Notes and related guarantees are being offered and issued, only to holders who have certified to OPI that either they are (a) in the
The Offering Memorandum is only available to holders who complete an eligibility letter confirming their status as Eligible Holders. Holders of Existing Notes who wish to receive a copy of the eligibility letters for the Second Amended Exchange Offers may contact the Information and Exchange Agent, at D.F. King & Co., Inc., 48 Wall Street,
Requests for the Amended Exchange Offer materials from Eligible Holders may be directed to the Information and Exchange Agent at D.F. King & Co., Inc., 48 Wall Street,
General
OPI is making the Second Amended Exchange Offers only by, and pursuant to, the terms of the Offering Memorandum, as amended by this press release. OPI reserves the right to terminate, withdraw, amend or extend one or more of the Second Amended Exchange Offers in its discretion, subject to the terms and conditions set forth in the Offering Memorandum, as amended, and not to provide withdrawal rights in connection therewith except as required by law.
None of OPI, Moelis & Company LLC, as dealer manager, the Information and Exchange Agent, their respective affiliates nor any other person makes any recommendation as to whether Eligible Holders should tender or refrain from tendering their Existing Notes in the Second Amended Exchange Offers, as applicable. Eligible Holders must make their own decision as to whether or not to tender their Existing Notes, as applicable, as well as with respect to the principal amount of the Existing Notes to tender.
The Second Amended Exchange Offers are not being made to any holders of Existing Notes in any jurisdiction in which the making or acceptance thereof would not be in compliance with the securities, blue sky or other laws of such jurisdiction. The Existing Notes that are not exchanged will continue to be outstanding in accordance with all other terms of the Existing Notes and the indentures governing such Existing Notes.
This press release is being made for informational purposes only in accordance with Rule 135c of the Securities Act and does not constitute an offer to purchase securities or a solicitation of an offer to sell any securities or an offer to sell or the solicitation of an offer to purchase any new securities, nor does it constitute an offer or solicitation in any jurisdiction in which such offer or solicitation is unlawful. The Second Amended Exchange Offers are being made solely on the terms and subject to the conditions set forth in the Offering Memorandum, as amended by this press release, and the information in this press release is qualified by reference to such Offering Memorandum.
About Office Properties Income Trust
OPI is a national REIT focused on owning and leasing office properties to high credit quality tenants in markets throughout
WARNING CONCERNING FORWARD-LOOKING STATEMENTS
Statements in this news release, including statements regarding the Second Amended Exchange Offers constitute “forward-looking statements” that do not directly or exclusively relate to historical facts. When used in this release, the words “may,” “will,” “might,” “should,” “expect,” “plan,” “anticipate,” “project,” “believe,” “estimate,” “predict,” “intend,” “potential,” “outlook,” and “continue,” and the negative of these terms, and other similar expressions are intended to identify forward-looking statements and information.
The forward-looking statements reflect OPI’s intentions, plans, expectations, anticipations, projections, estimations, predictions, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors, many of which are outside of OPI’s control. Important factors that could cause actual results to differ materially from the expectations expressed or implied in the forward-looking statements include known and unknown risks. Known risks include, among others, market conditions and the risks described in OPI’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports and risks and uncertainties related to our ability to consummate the Second Amended Exchange Offers.
Because actual results could differ materially from OPI’s intentions, plans, expectations, anticipations, projections, estimations, predictions, assumptions and beliefs about the future, you are urged to view all forward-looking statements with caution. OPI does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
A Maryland Real Estate Investment Trust with transferable shares of beneficial interest listed on the Nasdaq.
No shareholder, Trustee or officer is personally liable for any act or obligation of the Trust.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240523206467/en/
Questions regarding the Second Amended Exchange Offers may be directed to:
Kevin Barry, Senior Director, Investor Relations
(617) 219-1410
Source: Office Properties Income Trust
FAQ
What are the new expiration dates for OPI's exchange offers?
What is the interest rate for the new senior secured notes offered by OPI?
How much is the total issuance cap for OPI's new notes?
Who is eligible to participate in OPI's exchange offers?
What happens to OPI's existing notes if they are not exchanged?
