S&P hikes Diversified Healthcare

S&P said it raised its ratings for Diversified Healthcare Trust and its non-guaranteed senior unsecured notes to CCC+ from CCC- as well as its guaranteed senior unsecured notes to B from CCC+. The agency also assigned B issue-level and 1 recovery ratings to its new senior secured notes.

In the same rating action, S&P revised the recovery rating on the non-guaranteed notes to 4 from 3 and removed all ratings from CreditWatch, where it placed them with positive implications on Dec. 19. The outlook is negative.

DHC priced $941 million of zero-coupon senior secured bonds last month.

“The company will generate net proceeds of approximately $732 million from the issuance of its zero-coupon senior secured notes, which it will use to repay its $450 million secured credit facility due January 2024 and $250 million 4¾% senior unsecured notes due May 2024. DHC's refinancing efforts will enable it to regain compliance with the incurrence covenants under its public debt agreements, which is critical to providing it with greater financing options to address its looming debt maturities in 2025 and 2026,” S&P said in a press release.

The revised outlook reflects DHC's continuing liquidity pressure and the refinancing risk remaining with debt maturities in 2025 and 2026. “The outlook also reflects our expectation for a gradual recovery in the operating performance of the company's senior housing operating property (SHOP) portfolio, though the pace of this recovery remains uncertain,” the agency said.

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