Moody’s cuts Office Properties

Moody's Investors Service said it downgraded Office Properties Income Trust's corporate family rating to Caa1 from B2, senior unsecured debt ratings to Caa1 from B2 and senior unsecured shelf rating to (P)Caa1 from (P)B2. The speculative grade liquidity rating is unchanged at SGL-4. The outlook is now negative. Previously, the ratings were on review for downgrade.

The downgrade reflects OPI’s high financial leverage and liquidity challenges as it confronts substantial upcoming debt maturities. The REIT will need to refinance its $750 million unsecured credit facility maturing on Jan. 31. As of Sept. 30, it had $200 million drawn on the facility. OPI will also have to refinance $350 million in bonds due in May.

“Moody's expects OPI will refinance this facility before its maturity but will incur significantly weaker terms including higher pricing, reduced size and the contribution of collateral,” the agency said in a press release.

The agency said, “The negative outlook reflects OPI's weak financial flexibility as it is reliant on secured financings and asset sales as it seeks to refinance upcoming debt maturities, which will likely weaken the size and quality of its unencumbered asset pool. Other considerations include the REIT's mixed asset quality and challenging capital market conditions for commercial real estate, factors that are weakening its capacity to execute well-priced financing terms.”

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