I recommend a long position in OPI 4.5 2/1/25 bonds which are trading at 83 with a yield of 28%.
The company has 11 months to refinance the bonds, either through asset sales, CMBS issuance, or a debt exchange. Moelis has been retained to assist the company in restructuring its debt.
The crux of the investment thesis is that the company has 5.3B of total assets, of which they have already pledged 1.74B as collateral for other secured debt.
The unsecured debt covenants require secured debt < 40% of adjusted total assets and total unencumbered assets of at least 1.5x the unsecured debt.
As a result, the company has 1.7 billion of collateral with which to secure the upcoming 650M maturity. I believe this is sufficient collateral to provide the near term bond maturity with an exit at par, either thru a secured exchange or other means.
The market capitalization is 108M with a stock at 2.22 and 48.8M shares outstanding.
The debt structure is as follows:
Amt
Term loan
100
Revolver
232
Sr Sec. 9% 2029
300
Mortgages
177
Senior secured
809
4.5 2/1/25
650
2.815 6/15/26
300
2.54 2/1/27
350
3.55 10/15/31
400
6.375 6/23/50
162
Total Unsecured
1862
Total Debt
2671
Management will pull out all the stops to avoid filing for bankruptcy, and to avoid upending the valuable management fees paid to RMR.
I do not hold a position with the issuer such as employment, directorship, or consultancy. I and/or others I advise hold a material investment in the issuer's securities.
Catalyst
This investment is event-driven due to the near-term debt maturity.
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