Reliance on medical properties (NYSE: MPW) has fought a barrage of issues. Financially challenged tenants are struggling to pay rent amid rising interest rates are financing costs. These two factors made it through difficult to refinance existing debt as it matures.
however, the healthcare REIT has worked with its tenants to find a solution to their problems. It has also sold some hospital properties to pay down debt and increase liquidity. This makes it easier to refinance maturing debts. This progress is finally starting to lift the weight on the stock price, which is still down nearly 80% from its 2022 peak. That sell-off is why the REIT is currently yielding more than 10% even though it has cut its dividend last year.
On a selling spree to pay off debt
Medical Properties Trust has sold several hospital properties in recent years to pay off maturing debt. The country paid off about $1.6 billion in debt last year. The REIT was unable to refinance that debt due to rising interest rates and the financial difficulties faced by some of its top tenants.
However, there are more maturing debts, including a British loan of roughly $130 million and a $300 million Australian loan later this year. The REIT has been working on it walk ahead retire these debts by selling additional assets.
Medical Properties Trust initially aimed to generate $2 billion in additional liquidity this year. We are already 80% of the way there and raising $1.6 billion through asset sales, joint ventures and other means. The largest deal was a joint venture to sell a 75% stake in Utah hospitals, which raised $1.1 billion.
The company plans to use this money to reduce debt, including the repayment of its $300 million Australian term loan and some borrowings under its revolving credit facility. The REIT’s progress to date suggests that the REIT will exceed its initial target. who will give it offers a lot of liquidity heading into 2025.
Just breathe a little more room
Medical Properties Trust has more debt maturing next year. It has an even larger UK term loan ($883.6 million) and euro-denominated notes (about $539.5 million). She has explored various ways to tackle these debt maturities. While progress in asset sales should give the REIT the liquidity to repay this debt as it matures, the REIT is exploring other alternatives.
It recently closed an alternative solution. Medical Properties Trust secured an $800 million 10-year loan at a fixed interest rate of 6.9%, backed by 27 of the UK’s 36 hospital properties. This refinancing with a group of financial institutions will significantly extend the term of the debts. That will solve a major pain point by giving the REIT more financial flexibility. It can repay its 2024 UK term loan, part of the UK term loan maturing next year, and part of its credit facility.
With most of its short-term liabilities settled, the REIT can continue to focus on paying down its revolving credit facility, which matures in 2026. The REIT had borrowed $1.6 billion from that $1.8 billion facility at the end of the first quarter. However, this did not include redemptions following the closing of asset sales in April. The country has since modified this facility and reduced its credit base to $1.4 billion. Continuing to pay down that facility would reduce and yield interest expense it is easier to expand its term and on better terms. That would give the country even more breathing space to tackle future debt maturities.
Making progress step by step
Medical Properties Trust has faced tenant issues and tight credit market conditions. who have made Refinancing existing debts is becoming a greater challenge. These problems forced the company to sell hospitals to pay down debt as they age. However, as its financial profile improves, the REIT has been able to refinance some of its debt at a very attractive term, who will give it more financial flexibility. Although there is still more work to be done, it is financial The situation is improving with each step, reducing the risk that it will have to cut its dividend again.
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Matt DiLallo holds positions in Medical Properties Trust. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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