🏢New Chapter 11 Bankruptcy Filing - Office Properties Income Trust ($OPITS)🏢
Real estate landlord will need to a hire chapter 11 janitor (or Judge Isgur) to clean up its mess
Late in the evening on October 30, 2025, Office Properties Income Trust ($OPITS) (“OPI”) and seventy-two affiliates (together with OPI, the “debtors” and together with their non-debtor affiliates, the “company”) filed chapter 11 “… prearranged …,” 😉, sh*tshows in Latham & Watkins LLP’s Ray Schrock’s venue of choice, the Southern District of Texas (Judge Lopez).
Why the sarcasm? Let us know if this snippet, from the debtors’ first day presentation, sounds *prearranged* to you:
That’s, 🙄, roundabouts $76.4mm in prepetition, disputed original issue discount (“OID”). You still have heaps of quite unarranged wood to chop, Mr. Schrock.
But, for now, let’s ignore that fight and back up. Not long ago, we covered the company, its prior restructuring efforts, and its 124 properties spanning ~17.2mm feet² of “… high-quality office and mixed- use properties in select, growth-oriented U.S markets …”
… which, in case you were wondering, was more or less code for crappy buildings in the DC area (hence the largest tenant 👇), followed by locations in Texas and California.
Anyway, the debtors’ prior restructuring efforts created the funded debt that will be front and center in these cases. To recap, we’ll borrow from our prior piece:
“📍In February ’24, OPI issued $300mm of 9% senior secured notes due March ’29 ...”
… which gave rise to an ad hoc group of holders (the “March ‘29 ad hoc group”)* represented by Paul Weiss Rifkind Wharton & Garrison LLP (“Paul Weiss”) …
“📍In June and October ’24, OPI exchanged $895mm of existing unsecured notes. variously maturing in ’25, ’26, ’27 and ’31, for $610mm of new 9% senior secured notes due September ’29 at an average of 68 cents on the dollar.”
… which gave rise to an ad hoc group of holders (the “September ‘29 ad hoc group”)** represented by White & Case LLP (“W&C”)…
“📍The trust executed a third exchange transaction in December ’24, exchanging $445mm of new 3.250% senior secured notes due March ’27 plus roughly $16mm of common equity for $282mm of 4.5% senior unsecured notes due ’25…”
… and ~$58.5mm in cash, which gave rise to (i) an ad hoc group of holders (the “March ‘27 ad hoc group”)*** represented by Milbank LLP (“Milbank”) and (ii) after crunching the numbers … indeed, $445mm is more than $282mm … the OID debacle. Plus — holy hell, will these cases will be expensive — Glenn Agre LLP represents an entirely unsecured ad hoc group (the “unsecured ad hoc group”).
On a consolidated basis, the debt looked like this as of the petition date:
“Consolidated” being the key word. With 🙏 to Milbank for providing the least hideous option, here’s the org chart …
… along with its (relevant) color-coding breakdown:
“Dark Orange: The entities included in this group are subject to the first-priority lien securing the 2027 Notes. These are the 2027 First-Lien Obligors.
Light Orange: The entities included in this group are obligated on the 2027 Notes on an unsecured basis; they also owe a total of $14.4 million on unsecured Priority Guaranteed Notes, or ‘PGNs.’ They have no secured indebtedness. These entities are the 2027 Senior Unsecured Obligors.
Green: The entities included in this group are subject to a first-priority lien securing the March 2029 Notes. These entities are obligated on the 2027 Notes on an unsecured basis and are among the 2027 Unsecured Obligors.
Blue: The entities included in this group are subject to the first-priority lien securing the September 2029 Notes and the second-priority lien securing the 2027 Notes. The 2027 Note obligations of these entities are governed by the Intercreditor Agreement.
Yellow: The entities included in this group are subject to the first-priority lien under the January 2024 Credit Facility, as well as the second-priority lien securing the September 2029 Notes. They are not 2027 Note Obligors.”
But one problem for Milbank: the debtors brokered a $125mm DIP ($10mm interim)**** and restructuring support agreement (the “RSA”) with the W&C-repped September ‘29 ad hoc group. By virtue of its lien, the DIP does this to the March ‘27 ad hoc group’s unsecured claims …
… at the green and light-orange 2027 First-Lien Obligors, denoted 👇:
Which, in turn, pissed the March ‘27 ad hoc group right off. Per its objection:
“The Debtors commenced these cases to pursue a restructuring that would unlawfully divert value from the estates of the 2027 Unsecured Obligors to creditors of wholly separate Debtor entities—creditors with no claims against the 2027 Unsecured Obligors and no entitlement to their assets—all while making the 2027 Noteholders pay the costs of effectuating that transfer.”
Therefore, win-or-lose, the DIP will recover first at the 2027 Unsecured Obligors.
But what’s there to “win or lose”? We are glad you asked. Go ahead and peep the RSA’s milestones …
Specifically, the second one, which the debtors fulfilled by filing a November 2 complaint against the ‘27 holders’ trustee, UMB Bank, N.A. (“UMB”).***** Shifting gears from less than a year ago, the debtors state:
“Facing significant near-term debt maturities, lack of access to capital, and a challenging market environment, in December 2024, OPI entered into a private debt-for-debt transaction in which, in essence, OPI issued new notes with a face amount of $445 million due in 2027 (the ‘2027 Notes’) in exchange for $340 million in cash and unsecured notes due in 2025 (the ‘2025 Notes’).
The exchanging noteholders benefited from OPI’s distress and the impending maturity. Specifically, the exchanging noteholders gave up $282 million of 2025 Notes and $58 million in cash in return for $445 million of 2027 Notes, 11.5 million shares of OPI common stock, a total of $10 million in support premium payments, $4.6 million in cash for accrued interest on the 2025 Notes, and, for certain backstopping noteholders, a total of $15 million of backstop premium payments (the ‘December 2024 Exchange’). That exchange generated roughly $135 million in original issue discount (‘OID’).”
Now, the debtors are aiming to disallow the OID that ain’t yet accrued, again ~$76.4mm. Well, until more accrues next month. And the month after that. And month after that. It amortizes ~$5mm per while the cases linger in Houston.
Weeeeeeelllllllllllllllll, unless there’s no more OID to amortize. At the top, we mentioned the debtors filed “late in the evening” on October 30. That was crucial info. Earlier that same day, the March ‘27 ad hoc group beat ‘em to the punch. Back to its objection:
“On September 30, 2025, an interest payment [on the March ‘27 notes] became due and payable, but the Company did not pay. This resulted in a default in the payment of interest starting at 11:01 am that day, the minute after the deadline for payment was missed. By 11:01 am on October 30, 2025, a ‘period of 30 days’ had elapsed, and yet the Company still had not made the interest payment. At 1:14 pm that day—thirty days, two hours, and fourteen minutes after the Company was required to deposit its interest payment—requisite owners of the 2027 Notes sent a notice of default and acceleration to the Company and the indenture trustee … It was not until several hours later, at approximately 8:30 p.m., that the Debtors began filing their chapter 11 petitions. The Debtors apparently were under the mistaken impression that their cure period lasted until 11:59 pm on October 30, 2025—that is, that the Debtors were entitled to 30.54 days to cure their nonpayment. That is manifestly contrary to what the Indenture and note say, however.”
Hot damn, do we love a technicality ‘round here. Had the debtors filed 9.5 hours earlier, the group’s argument wouldn’t apply and the debtors might’ve found themselves ~$76mm to the good 😬.******
In any event, folks can and will burn bundles of cash in the coming months doing some combination of litigating, mediating with Judge Isgur, and running up the bill talking. To wit, the proposed, RSA-compliant DIP budget “… assumes that the single largest use of the loan proceeds will be professional fees, estimated to be over $31 million for just the first 13 weeks of the cases.”
As for the rest of the RSA, it contemplates the following outcomes:
… or said another way, reorganizing around the September ‘29 ad hoc group + 2% of the reorg equity to the debtors’ manager, The RMR Group LLC (“RMR”).*******
We’re not going to dig deeper than that this go around. Mr. Schrock already fooled us once this year with DocuData prior to a “global” settlement, which is precisely where we expect this POS to eventually land.
So, going back to the task at hand, after a ~4.5-hour first-day hearing on November 3, 2025, at which all the pre-filing beef got aired, Judge Lopez swooned all over Judge Isgur, and the former did what he always does:
“It is clear to me that the debtor needs some funds to operate, to make sure, um, there’s a need for some financing over the next few weeks.”
Given how often we hear the Honorable Chris Lopez deliver that phraseology, you’d expect to find the standard somewhere in the Bankruptcy Code. Alas.
He approved the $10mm interim DIP (along with a separate, greater-than-the-financing $12.5mm backstop fee) and all other requested first-day relief. However, he did pump the brakes on the debtors’ adversary proceeding, deciding jack needed to happen for the next 30 days while folks mediate or plot their next move. The second-day hearing is scheduled for for December 3, 2025 at 1pm CT. In the interim, perhaps the March ‘27 ad hoc group will make good on its threats (you know, as leverage until it all settles); beyond the DIP, its objection suggested “… appointment of a trustee, conversion, dismissal or suspension, or stay relief to permit nonbankruptcy enforcement …”
The debtors are represented by L&W (Ray Schrock, Andrew Parlen, Anupama Yerramalli, Amy Quartarolo, Ashley Gherlone Pezzi, Anthony Joseph) and Hunton Andrews Kurth LLP (Timothy “Tad” Davidson II, Ashley Harper, Philip Guffy) as legal counsel, AlixPartners LLP (John Castellano) as financial advisor and CRO, and Moelis & Company ($MC) (Barak Klein, Rachel Murray) as investment banker. OPI’s independent trustee is Tim Pohl, who composes its Quinn Emanuel Urquhart & Sullivan, LLP (Susheel Kirpalani, Samuel Nitze, Kate Scherling, Maxwell Hawley)-repped special committee. Jill Frizzley serves as an independent member of the boards of the subsidiaries pledged to the ‘27 notes, and Patrick Bartels serves as independent member of the boards of the subsidiaries pledged to the ‘29 notes. The March ‘27 ad hoc group is represented by Milbank (Dennis Dunne, Andrew Leblanc, Abhilash Raval, Michael Price, Alexander Lees, Brian Kinney) and Porter Hedges LLP (John Higgins, Eric English, Megan Young-John, James Keefe, Joanna Caytas) as legal counsel and Evercore, Inc. ($EVR) (Stephen Goldstein, Roopesh Shah, Alan Finnie) as investment banker. The March ‘29 ad hoc group is represented by Paul Weiss (Sung Pak, William Clareman, Robert Britton, Luxiang Wang) and Munsch Hardt Kopf & Harr, P.C. (John Cornwell, Alexander Perez) as legal counsel and Ducera Partners LLC (Eli Silverman, Sean Monaghan) as investment banker. The September ‘29 ad hoc group is represented by W&C (Brian Pfeiffer Glenn Kurtz, Aaron Colodny, Charles Koster, Adam Swingle, Andrew Costello) as legal counsel and Houlihan Lokey, Inc. ($HL) (Saul Burian, Marcus Bellows, Tanya Wong) as investment banker. The unsecured ad hoc group is represented by Glenn Agre LLP (Andrew Glenn, Kurt Mayr, Rich Ramirez, Malak Doss) and Kane Russell Coleman Logan, PC (Mark Taylor) as legal counsel and Province, LCC (Daniel Moses, Frederick Chin, Tanner James) as financial advisor. Acquiom Agency Services, as DIP agent, is represented by Pryor Cashman LLP (Seth Lieberman) and Gray Reed (Jason Brookner) as legal counsel. Wilmington Savings Fund Society, FSB, as prepetition credit agreement agent, is represented by Jones Day (Benjamin Rosenblum, Matthew Corcoran, Benjamin Sandberg) as legal counsel and FTI Consulting, Inc. ($FCN) (William Nolan, Christopher Goff, Eric Younger) as financial advisor. UMB, as March ‘27 indenture trustee, is represented by Arent Fox Schiff LLP (Andrew Silfen, Beth Brownstein, Nicholas Marten, Justin Kesselman) as legal counsel. Wilmington Trust, N.A., as March ‘29 indenture trustee, is represented by Kelley Drye & Warren LLP (James Carr, Kristin Elliott, Katherine Cavins) as legal counsel. U.S. Bank Trust Company, N.A. or its successor, as September ‘29 indenture trustee, hasn’t bothered to have advisors show up yet. Computershare Trust Company, as priority guaranteed notes trustee, is represented by Emmet, Marvin & Martin, LLP (Thomas Pitta, Jennifer Pierce, Michelle Kraidman) as legal counsel. CSC Delaware Trust Company, as unsecured notes trustee, is represented by Winston & Strawn LLP (Jon Levine, Tom Good, Madison Haueisen, Laurens Wilkes) as legal counsel. The RMR Group LLC, as the debtors’ manager, is represented by Wachtell, Lipton, Rosen & Katz (Scott Charles, Emil Kleinhaus, Neil Snyder, Angela Herring) and Vinson & Elkins LLP (Paul Heath, Matthew Struble, Kiran Vakamudi) as legal counsel.
*Per docket 69 …
… the March ‘29 ad hoc group is composed of Axebrook Capital LLP, Citadel Mult-Asset Master Fund Ltd., Citigroup Global Markets, Inc., FourSixThree Capital LP, Oak Hill Advisors, L.P., Point72 Global Macro Investments, LLC, and Taconic Capital Advisors L.P.
**Per docket 22, the September ‘29 ad hoc group is composed of Cetus Capital LLC, ExodusPoint Capital Management, LP, Helix Partners Management LP, Liberty Mutual Investments, Mackenzie Financial Corporation, Nuveen Asset Management, LLC, Redwood Capital Management, and Whitebox Advisors LLC.
***Per docket 162, the March ‘27 ad hoc group is composed of FFI Fund Ltd., FYI Ltd., MSD Partners, L.P., and Olifant Fund, Ltd.
****The DIP carries interest at 12% cash-pay and features a 2.25% PIK upfront fee, a 5.75% exit fee, and 10% “anchor capital commitment fee” to the September ‘29 Ad Hoc Group’s steerco composed of Helix Partners Management LP and Redwood Capital Management LLC, which will also benefit from a prepetition $10mm “settlement” payment “… [a]s consideration for the efforts of the September 2029 Ad Hoc Group.”
*****UMB also filed a short and sweet DIP objection, which basically told the court that the debtors have $28.9mm in cash and ought to live off that during the interim period.
******Not to suggest the Milbank-guided March ‘27 ad hoc group wouldn’t have had a backup. Because “… the Debtors’ own valuation assumptions concede the solvency of the 2027 Unsecured Obligors …,” the group also argues the solvent-debtor exception applies, citing the Fifth Circuit’s 2022 opinion in In re Ultra Petroleum Corp (“Solvent debtors are, by definition, able to pay their debts in full on their contractual terms, and absent a legitimate bankruptcy reason to the contrary, they should.”). Regardless, we smell a “global” settlement of all issues on the horizon.
*******The debtors have no employees so everything that gets done in their name comes by way of RMR.
Company Professionals:
Legal: Latham & Watkins LLP (Ray Schrock, Andrew Parlen, Anupama Yerramalli, Amy Quartarolo, Ashley Gherlone Pezzi, Anthony Joseph) and Hunton Andrews Kurth LLP (Timothy “Tad” Davidson II, Ashley Harper, Philip Guffy)
Financial Advisor and CRO: AlixPartners LLP (John Castellano)
Investment Banker: Moelis & Company ($MC) (Barak Klein, Rachel Murray)
OPI Special Committee: Tim Pohl
Legal: Quinn Emanuel Urquhart & Sullivan, LLP (Susheel Kirpalani, Samuel Nitze, Kate Scherling, Maxwell Hawley)
Subsidiary Special Committees: Jill Frizzley (March ‘27 Notes Subsidiary Obligors), Patrick Bartels (September ‘29 Notes Subsidiary Obligors)
Claims Agent: Kroll (Click here for free docket access)
Other Parties in Interest:
Ad Hoc Group of 2027 Noteholders
Legal: Milbank LLP (Dennis Dunne, Andrew Leblanc, Abhilash Raval, Michael Price, Alexander Lees, Brian Kinney) and Porter Hedges LLP (John Higgins, Eric English, Megan Young-John, James Keefe, Joanna Caytas)
Investment Banker: Evercore, Inc. ($EVR) (Stephen Goldstein, Roopesh Shah, Alan Finnie)
Ad Hoc Group of March 2029 Noteholders:
Legal: Paul Weiss Rifkind Wharton & Garrison LLP (Sung Pak, William Clareman, Robert Britton, Luxiang Wang) and Munsch Hardt Kopf & Harr, P.C. (John Cornwell, Alexander Perez)
Investment Banker: Ducera Partners LLC (Eli Silverman, Sean Monaghan)
Ad Hoc Group of September 2029 Noteholders
Legal: White & Case LLP (Brian Pfeiffer Glenn Kurtz, Aaron Colodny, Charles Koster, Adam Swingle, Andrew Costello)
Investment Banker: Houlihan Lokey, Inc. ($HL) (Saul Burian, Marcus Bellows, Tanya Wong)
Unsecured Ad Hoc Group
Legal: Glenn Agre LLP (Andrew Glenn, Kurt Mayr, Rich Ramirez, Malak Doss) and Kane Russell Coleman Logan, PC (Mark Taylor)
Financial Advisor: Province, LCC (Daniel Moses, Frederick Chin, Tanner James)
DIP Agent: Acquiom Agency Services
Legal: Pryor Cashman LLP (Seth Lieberman) and Gray Reed (Jason Brookner)
Prepetition Credit Facility Administrative Agent: Wilmington Savings Fund Society, FSB
Legal: Jones Day (Benjamin Rosenblum, Matthew Corcoran, Benjamin Sandberg)
Financial Advisor: FTI Consulting, Inc. ($FCN) (William Nolan, Christopher Goff, Eric Younger)
Prepetition March ‘27 Notes Indenture Trustee: UMB Bank, N.A.
Legal: Arent Fox Schiff LLP (Andrew Silfen, Beth Brownstein, Nicholas Marten, Justin Kesselman)
Prepetition March ‘29 Indenture Trustee: Wilmington Trust, National Association
Legal: Kelley Drye & Warren LLP (James Carr, Kristin Elliott, Katherine Cavins)
Prepetition Priority Guaranteed Notes Indenture Trustee: Computershare Trust Company, N.A.
Legal: Emmet, Marvin & Martin, LLP (Thomas Pitta, Jennifer Pierce, Michelle Kraidman)
Prepetition Unsecured Notes Indenture Trustee: CSC Delaware Trust Company
Legal: Winston & Strawn LLP (Jon Levine, Tom Good, Madison Haueisen, Laurens Wilkes)
Debtors’ Manager: The RMR Group LLC
Legal: Wachtell, Lipton, Rosen & Katz (Scott Charles, Emil Kleinhaus, Neil Snyder, Angela Herring) and Vinson & Elkins LLP (Paul Heath, Matthew Struble, Kiran Vakamudi)