This story has been updated
Medical Properties Trust has hired Goldman Sachs to soft market a $1-2 billion new issue secured bond at 10% interest, according to multiple sources familiar with the deal. Questions remain on what the use of proceeds would be restricted to and it’s unclear on who would be allowed to participate in the offering.
MPT currently has $1.2-1.3 billion of structurally senior bank debt and the next unsecured 3.325% 500 million sterling bond maturity is March. Bondholders who spoke with this reporter think MPT needs to raise at least $2bn to cover their liquidity gap and hope the proceeds would be used to pay off all the bank debt and the 2025 bond.
On January 15th MPT drew down its RCF to pay a $700 million term loan leaving them virtually with no liquidity according to multiple credit analyst interviewed by this reporter. Bloomberg first reported the term loan payoff.
MPT did not respond for comment as of press time.
UPDATE 1.21.25 – sources say the new secured bond offering would be priced next week and could be at a 9% coupon now. But that seems too low given one large current investor who is long the bonds said they wouldn’t buy unless its 12% or higher. Just look at what MPT got for the private credit deal it did on Circle assets just ten months ago; a 8% yield to maturity with fees and analysts have said the mortgages that backed that deal are estimated to be some of MPT’s best assets.
Question is what are MPT’s good unencumbered assets to secure these days to back a new $2 billion secured bond? 9fin’s crack credit analyst team of Varun Gianchandani and Emmet Mc Nally highlighted in their last MPT report that total non-distressed unencumbered assets are $3.575 billion. This includes: Priory, Lifepoint, Ramsay, and Ernest Heath. But given how MPT has a history of not realistically valuing their assets because the company is allegedly slow to take impairments and floats their tenants working capital loans to pay the rent; a credit investor is taking some risk on accepting secured assets thus you would think the coupon has to be higher. Bond funds and analyst I spoke with today point out that to raise a $2 billion secured bond Goldman likely has to show new investors MPT has around $4 billion of good assets for collateral.
There is a catch 22 for MPT and credit investors right now. Because of the Unsecured Leverage Ratio covenant MPT’s bank lenders have a lot power to control which assets and how many can be attached to a new deal. Sentiment I am hearing is MPT needs to have enough money to take out those bank lenders if it wants more control in selling new issue bonds at the prices they want.
UPDATE 1.22.2025 – MPT’s ‘non deal roadshow’ is now circulating. I have seen the presentation which is very light on facts regarding their current financial situation and long on magically retenanted Steward operators rent estimates into 2026 that have no supporting backup on how they get there— like what are the required investment cost guys to get to $160 million of rents in a year?
But what did stand out is in the Forward Looking Statements talking about risk, page 2 of the slide show folks, which now magically tells investors that they MIGHT NOT be in compliance with their financial covenants under their debt facilities! Or obtain additional debt covenant relief under its credit facilities, which is their credit agreement not the bonds. You can see in MPT’s release ,from January 12, on the Prospect bankruptcy this risk is not mentioned. The press release went out to the general public. So now only private investors invited to see the roadshow know MPT’s real risk?
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