Medical Properties Belief entered right into a debt refinancing deal that matures subsequent yr.
Medical Properties Belief (MPW) fought a flurry of questions. Financially challenged tenants wrestle to pay hire whereas rates of interest enhance him borrowing prices. These two components made it so it’s tough to refinance current debt because it matures.
Nonetheless, Artwork Healthcare REIT works with its tenants to unravel their issues. It additionally bought some hospital properties to pay down debt and enhance liquidity. This makes it simpler to refinance maturing debt. That progress is lastly beginning to add weight to the inventory value, which remains to be down practically 80% from its 2022 peak. That selloff is the rationale the REIT is at present yielding greater than 10%, regardless that it lower its dividend final yr.
On sale to repay the debt
Over the previous couple of years, Medical Properties Belief has bought a number of hospital properties to repay debt. It paid off about $1.6 billion in debt final yr. The REIT has been unable to refinance this debt because of skyrocketing rates of interest and monetary issues confronted by a few of its anchor tenants.
Nonetheless, it has extra debt maturing, together with a UK time period mortgage of about $130 million and a $300 million time period mortgage in Australia later this yr. The REIT works to to overhaul these debt reimbursement phrases by promoting further belongings.
Medical Properties Belief initially deliberate to obtain $2 billion in further liquidity this yr. It’s already 80% of the way in which there, having raised $1.6 billion via asset gross sales, joint ventures and different means. The biggest deal was a three way partnership to promote a 75% stake in hospitals in Utah, which raised $1.1 billion.
The corporate plans to make use of the money to scale back debt, together with repaying a $300 million time period mortgage in Australia and sure borrowings below the revolving credit score facility. The REIT’s progress up to now leads it to consider it is going to exceed its preliminary goal, who will give that is a number of liquidity in 2025.
Getting extra breath room
Medical Properties Belief has extra debt due subsequent yr. It has a fair bigger UK time period mortgage ($883.6 million) and euro-denominated notes (about $539.5 million). He explored numerous methods to eradicate these debt reimbursement phrases. Whereas progress on asset gross sales ought to give it the liquidity to repay that debt because it matures, the REIT is exploring different alternate options.
It lately closed to another the answer. Medical Properties Belief secured a 10-year, $800 million mortgage at a hard and fast fee of 6.9%, backed by 27 of the hospital’s 36 UK properties. Such refinancing in a bunch of economic establishments will considerably lengthen the time period of debt reimbursement. This can remedy a key downside by giving REITs extra monetary flexibility. It could possibly repay its UK time period mortgage in 2024, a part of the UK time period mortgage due subsequent yr and a part of the credit score facility.
With a lot of its debt coming due, the REIT might proceed to concentrate on repaying its revolving credit score facility, which matures in 2026. The REIT borrowed $1.6 billion, in contrast with $1.8 billion on the finish of the primary quarter. Nonetheless, this doesn’t embrace funds following the closing of the asset sale in April. It has since amended that facility and decreased its mortgage base to $1.4 billion. By persevering with to make funds on this facility, he’ll cut back his curiosity prices and earn simpler to broaden his maturity and on higher phrases. This may give much more room to contemplate future debt repayments.
Progress step-by-step
Medical Properties Belief has needed to deal with tenant points and tight credit score market situations, who did refinancing current debt turns into tougher. These issues compelled the corporate to promote the hospital to repay debt because it got here due. Nonetheless, with an improved monetary profile, the REIT was in a position to refinance a few of its debt on very enticing phrases., who will give it is extra monetary flexibility. Whereas he has extra work, his monetary the state of affairs improves with every step, lowering the danger that it might want to lower its dividend once more.
Matt Dillala holds positions on the well being belief. The Motley Idiot has no place in any of the shares talked about. The Motley Idiot has a disclosure coverage.