S&P downgrades Senior Housing

S&P said it lowered the issuer credit rating on Senior Housing Properties Trust to BB+ from BBB-.

The outlook is negative.

The agency also said it affirmed a BBB- rating on the company's unsecured notes and assigned a 2 recovery rating.

Senior Housing Properties has reached an agreement to restructure the lease terms with its top tenant, Five Star Senior Living Inc., providing significant rent cuts in 2019, S&P said.

Beyond 2019, the agreement includes transitioning all of Five Star's triple-net leased facilities to managed properties, which will lead to increased cash flow volatility, the agency said.

The negative outlook reflects a view that the restructured leases will materially increase leverage at the time of the transaction, S&P said, and the planned transition to managed properties will heighten cash flow volatility in future years.

The agency said it believes there is a lot of execution risk surrounding the planned asset sales, which could result in modestly higher leverage than anticipated.

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