Office Properties Income Trust Announces Amendments to Private Exchange Offers Relating to Existing Unsecured Senior Notes
Office Properties Income Trust (Nasdaq: OPI) has amended its previously announced private exchange offers for its senior unsecured notes due 2025, 2026, 2027, and 2031. These notes will now be exchanged for new 9.000% Senior Secured Notes due 2029. The amendments include changes to the acceptance priority levels and new priority amounts. The maximum principal amount issued remains $610 million. The expiration time for these offers has been extended to June 4, 2024. As of May 17, 2024, OPI received tenders representing $399.1 million in aggregate principal amount of the existing notes. The offers are being made to qualified institutional buyers in the US and non-US persons outside the US. The new notes will not be registered under the Securities Act, meaning they are subject to transfer restrictions.
- Extension of expiration time to June 4, 2024, provides more time for participation.
- Exchange offer targets $610 million in new notes, indicating strong future liquidity.
- High participation level with $399.1 million in tenders received as of May 17, 2024.
- New notes will not be registered, limiting transferability and resale options.
- Existing noteholders face pro rata reduction if tenders exceed priority amounts.
- Waiver of minimum tender conditions could impact the final issuance amount.
Insights
The amendments to the private exchange offers by Office Properties Income Trust (OPI) to exchange its existing unsecured senior notes for new secured notes with a 9.000% interest rate due 2029 have significant implications. One key aspect is the improvement in credit security because the new notes are secured, meaning they have collateral backing them, reducing the risk for noteholders compared to the previous unsecured notes. From a liquidity perspective, OPI is extending the maturity of its debt, which provides more breathing room to manage cash flows over the coming years.
However, the 9.000% interest rate on the new notes is quite high, indicating higher perceived risk associated with OPI's financial health. This could suggest that the market has concerns about OPI’s future cash flow generation or its ability to service its debt. High interest expenses could pressure the company’s profitability in the coming years, impacting earnings and potentially the value of its common stock.
OPI's decision to amend its exchange offers and prioritize certain notes over others reflects a strategic approach to liability management. The staggered priority levels and pro-rata reduction mechanism ensure a more balanced distribution of risk among note holders. Notably, the waiver of the minimum tender conditions and the extension of the expiration time indicate a strong will to complete the exchange, suggesting that initial participation might not have met expectations.
Moreover, the offer targets 'qualified institutional buyers' and non-U.S. persons, which can limit the liquidity and tradability of the new notes since these are not registered under the Securities Act and are subject to transfer restrictions. This limited marketability could affect the pricing of the new notes, potentially making them less attractive to some investors despite the secured nature and high coupon rate.
The issuance of $610 million in new secured notes indicates OPI’s intent to improve its debt structure, yet it also highlights the company’s significant reliance on debt financing. The high acceptance priority given to the 2031 and 2027 notes suggests an effort to address longer-term debt first, likely aiming to manage nearer-term repayment pressures. This strategic approach helps OPI to stagger debt repayments, reducing immediate financial stress.
Nevertheless, the high yield on the new notes (9.000%) will increase the cost of debt, which could have downstream effects on OPI’s ability to reinvest in its operations or pursue growth initiatives. Investors must weigh the benefits of longer-term debt restructuring against the increased cost and potential financial strain over time.
Amended Exchange Consideration
Under the terms of the Amended Exchange Offers, holders exchanging their Existing Notes will be entitled to receive the revised amounts of New Notes set forth in the table below (the “Amended Exchange Consideration”), subject to pro rata reduction as described below. The Amended Exchange Consideration is the same as the early exchange consideration offered to holders who previously tendered prior to the May 14, 2024 early delivery time.
Amended Acceptance Priority Levels; New Priority Amounts for Each Series
The Acceptance Priority Levels for Existing Notes are also being modified as part of the 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 Consideration 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 Consideration 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 Amended Exchange Offers remains
Updated Consideration Table
Existing Notes to Be Exchanged |
CUSIP/ISIN |
Existing Aggregate Outstanding Principal Amount |
“Priority Amount” of New Notes |
Acceptance Priority Level for Undersubscribed New Notes Amount |
Exchange Consideration |
|||||
Existing 2031 Notes |
67623CAF6/US67623CAF68 |
|
|
1 |
|
|||||
Existing 2027 Notes |
67623CAE9/US67623CAE93 |
|
|
2 |
|
|||||
Existing 2026 Notes |
67623CAD1/US67623CAD11 |
|
|
3 |
|
|||||
Existing 2025 Notes |
81618TAC4/US81618TAC45 |
|
|
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 Consideration Table above.
|
|
|
|
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Existing 2031 Notes |
Existing 2027 Notes |
Existing 2026 Notes |
Existing 2025 Notes |
|||
Existing 2027 Notes |
Existing 2031 Notes |
Existing 2031 Notes |
Existing 2031 Notes |
|||
Existing 2026 Notes |
Existing 2026 Notes |
Existing 2027 Notes |
Existing 2027 Notes |
|||
Existing 2025 Notes |
Existing 2025 Notes |
Existing 2025 Notes |
Existing 2026 Notes |
Waiver of Minimum Tender Conditions
In addition, OPI announced it has waived the conditions requiring (i) the tender of at least
Extension of Expiration Time
In connection with the amendments, OPI announced that the expiration time for the 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 5:00 p.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 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 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 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 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 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 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 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 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 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/20240519530074/en/
Questions regarding the 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 terms for the OPI amended exchange offers?
When is the new expiration time for the OPI exchange offers?
How much has been tendered in OPI's exchange offers as of May 17, 2024?
What restrictions apply to the new OPI notes?
What is the maximum principal amount of new notes OPI aims to issue?
