Medical Properties Trust (NYSE:MPW) struggled a dam of problems. Financially Struggling Tenants Struggled to Pay Rent as Interest Rates Rise It is borrowing costs. These two factors allowed difficult to refinance existing debt as it matures.
However, the Healthcare REIT worked with his tenants to resolve their problems. It also sold some hospital properties to pay down debt and increase cash flow. This makes it easier to refinance maturing debts. This progress is finally starting to take some weight off the stock price, which is still down nearly 80% from its 2022 peak. This selloff is why the REIT is currently yielding more than 10%, even if it cut its dividend last year.
In full sale to pay off debt
Medical Properties Trust has sold several hospital properties over the past two years to pay off maturing debts. It has paid off about $1.6 billion in debt over the past year. The REIT was unable to refinance this debt due to soaring interest rates and financial problems facing some of its major tenants.
However, its debt is larger and is coming due, including a UK term loan of around $130 million and an Australian term loan of $300 million later this year. The FPI has endeavored to get ahead this debt matures by selling additional assets.
Medical Properties Trust initially aimed to generate $2 billion in additional cash this year. We are already 80% of the way there, raising $1.6 billion through asset sales, joint ventures and other means. The largest deal was a joint venture to sell a 75 percent stake in Utah hospitals, which raised $1.1 billion.
The company plans to use the money to reduce its debt, including repaying the $300 million Australian term loan and some borrowings under its revolving credit facility. The progress made to date by the FPI leads it to believe that it will exceed its initial objective, which will give there is plenty of liquidity between now and 2025.
Breathe a little more bedroom
Medical Properties Trust has more debt coming due next year. It has an even larger British term loan ($883.6 million) and euro-denominated notes (around $539.5 million). She explored various ways to address these debt maturities. Although its progress in selling assets should give it the liquidity to repay this debt as it comes due, the REIT is exploring other alternatives.
It recently closed its doors on an alternative solution. Medical Properties Trust has secured an $800 million, 10-year loan at a fixed interest rate of 6.9%, secured by 27 of its 36 hospital properties in the UK. This refinancing with a group of financial institutions will considerably extend the maturity of its debt. This will solve a key problem by giving the REIT more financial flexibility. It can repay its UK term loan for 2024, part of the UK term loan maturing next year and part of its credit facility.
With most of its short-term debt maturities settled, the REIT can continue to focus on repaying its revolving credit facility, which matures in 2026. The REIT had borrowed $1.6 billion on this facility of $1.8 billion at the end of the first quarter. However, this does not include repayments after the asset sales close in April. It has since modified this facility and reduced its borrowing base to $1.4 billion. Continuing to repay this facility would reduce its interest charges and make it is easier to extend its maturity and under better conditions. This would give it even more room to maneuver to meet future debt maturities.
Progress one step at a time
Medical Properties Trust faced tenant issues and tight credit market conditions, who did refinancing existing debt is more difficult. These problems forced the company to sell hospitals to pay off debt as it fell due. However, thanks to the improvement of its financial profile, the REIT was able to refinance part of its debt at a very attractive term., which will give it’s more financial flexibility. Although he still has work to do, he financial The situation improves with each step, reducing the risk of having to cut its dividend again.
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Matt DiLallo holds positions with Medical Properties Trust. The Motley Fool has no position in any of the securities mentioned. The Motley Fool has a disclosure policy.
This Ultra-High-Yielding Dividend Stock Solved a Key Problem was originally published by The Motley Fool