Office Properties Income Trust's Senior Secured Notes Rated 'B-' (Recovery Rating: '1')

TORONTO (S&P Global Ratings) Feb. 13, 2024--S&P Global Ratings today assigned its 'B-' issue-level rating and '1' recovery rating to Office Properties Income Trust's (OPI) senior secured notes. The '1' recovery rating indicates our expectation for very high recovery (90%-100%; rounded estimate: 90%) in the event of a payment default. The company plans to use the net proceeds from these notes, along with borrowings from its secured revolving credit facility, to redeem its outstanding 4.25% senior unsecured notes due 2024. Our 'CCC' issuer credit rating and negative outlook on OPI are unchanged. We continue to believe the company faces significant near-term refinancing risk, given its material upcoming debt maturities and constrained access to capital. Additionally, we expect secular headwinds will

...ability to generate adequate cash flow to service its debt and other fixed-charge obligations, such as maintenance costs. Simulated default assumptions - Simulated year of default: 2025 - Blended stress on NOI: 25% - NOI at emergence: $254 million - Blended capitalization rate: 12.89% Simplified waterfall - Gross recovery value: $2.24 billion - Property level costs (5%): $112 million - Aggregate property-level debt (less deficiency claims): $140 million - Aggregate residual value: $1.99 billion - Administrative expenses (5%): $100 million - Net recovery value: $1.89 billion - Secured credit facility collateral recovery value: $442 million - Secured debt outstanding: $441 million - Secured notes collateral recovery value: $251 million - Secured notes outstanding: $314 million - Secured notes deficiency claim: $63 million - Residual value (after secured debt): $1.2 billion - Unsecured senior notes outstanding: $1.9 billion - Secured notes deficiency claim: $63 million - Aggregate unsecured...

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