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Office Properties Income Trust (OPI) is considering a bankruptcy filing ahead of more than $900m of debt maturities, according to sources.

The board of the struggling REIT has also brought on John Castellano of AlixPartners as chief restructuring officer, according to a SEC filing on 16 September.

The move comes as various creditor groups have been in negotiations with the REIT ahead of a potential bankruptcy, which is expected to be complicated by potential fights over providing the DIP financing and valuation of the company, as well as an original issue discount issue tied to its $445m 3.25% SSNs due 2027, sources said.

Some 2027 secured debtholders organized with Milbank and Evercore, another creditor group holding about $610m 9% secured bonds due 2029 banded together with Houlihan Lokey and White & Case while certain holders of OPI’s other tranche of $300m 9% senior secured notes due 2029 formed a cooperation agreement with Paul Weiss that is open to other investors.

OPI meanwhile brought on Latham & Watkins and has been seeking advice from Moelis on its debt maturities, 9fin previously reported.

The REIT has $134m of 2.65% SUNs due June 2026 followed by the 2027 maturities of a $325m revolver, $100m secured term loans, $78.3m of 2.4% SUNs and $268m of 3.25% SSNs.

In January, OPI tried to exchange bonds that weren’t tendered in a June 2024 deal, but few holders took them up on the offer. Its ability to refinance or raise new secured debt has been hampered by its tight covenant headroom, executives said during its Q2 25 earnings call in July.

Meanwhile, OPI suspended its dividends on 10 July to save cash, but still expects to burn at least half of its liquidity by the end of the year. Its $325m RCF remained fully drawn at the end of Q2 25 and it ended the quarter with a total liquidity of $73.1m in cash on hand.

OPI has been under pressure as its largest tenant, the federal government, significantly cut back on its office space since the pandemic upended the office market. In 2019, the government leased 39.2% of OPI’s portfolio but now only occupies 17.2%, according to its earnings statements.

Things are expected to get worse as OPI warned on its Q2 25 earnings call that about 1.3 million square feet of leases were set to expire by the end of the year, representing about $30m of revenue. Executives expect a good chunk not to renew and is gearing up for a $11.2m loss in annual rental income.

Quotes on OPI’s $300m 2.65% notes due 2026 were at 27.94 cents on the dollar on 16 September, up around 4.5 points from the previous day, while its $350m 2.4% notes due 2027 were quoted at 24.50 cents on the dollar, up around 1.5 points.

Meanwhile, OPI’s stock dropped 21% on Tuesday 16 September, ending the day at 83 cents per share.

Castellano and a spokesperson for OPI did not immediately respond to requests for comment.