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Omega Healthcare tenant Orianna files for Chapter 11 bankruptcy protection

Omega Healthcare Investors Inc. tenant Orianna Health Systems filed for Chapter 11 bankruptcy protection, and as part of the voluntary restructuring plan, 23 of the 42 facilities Orianna operates will be transferred to new operators.

The remaining 19 facilities will be sold under a restructuring-support agreement between Omega and Orianna, which is subject to approval by the U.S. Bankruptcy Court for the Northern District of Texas and forms the basis for Orianna's restructuring. Omega committed to provide up to $30 million in debtor-in-possession financing, which will be used to repay Orianna's current working-capital lender and to provide the operator with liquidity for ongoing business operations.

Omega reaffirmed previous adjusted funds from operations guidance for 2018 of $2.96 to $3.06 per share, with CEO C. Taylor Pickett noting in a release that the seniors housing real estate investment trust had previously assumed it would not be recording revenue related to its Orianna portfolio for the majority of the year.

Under the restructuring-support agreement, Orianna will recommence partial rent payments at $1.0 million per month. Omega expects the facility transfer to new operators to be approved by the bankruptcy court within 45 days, to be followed by required state-level approvals. The restructuring plan is expected to be confirmed by the court within 110 days, and the sale of the remaining properties to be completed by the end of 2018.

In 2017, Omega recorded impairments of $194.7 million on Orianna's leases and the REIT continues to expect the rent for the transition properties, as well as the rent equivalent for the 19 assets to be sold, to be in an estimated range of $32.0 million to $38.0 million. Pickett added that Omega does not expect Orianna's bankruptcy filing to materially affect the fair value of the properties and does not anticipate further impairments on the operator's leases.