SCHEDULE: Redwood Capital Boosts Stake in Office Properties Income Trust

Redwood Capital Management, LLC and its affiliates have increased their beneficial ownership of Office Properties Income Trust common shares to 19.7% following the company's emergence from bankruptcy.

Summary

• Redwood Capital Management, LLC and its affiliates (collectively, the Reporting Persons) have amended their Schedule 13D filing to reflect an updated beneficial ownership of Office Properties Income Trust (the Issuer).
• The Reporting Persons now beneficially own 4,327,521 Common Shares of Beneficial Interest, representing 19.7% of the outstanding shares.
• This ownership stake was acquired on June 17, 2026, as part of the Issuer's emergence from Chapter 11 bankruptcy proceedings.
• The shares and other consideration were received in exchange for the Redwood Funds' holdings of the Issuer's 9.00% senior secured notes due September 2029 and debtor-in-possession financing claims.
• As a result of this ownership, Redwood Capital Management, LLC has been granted certain rights, including the designation of up to two Trustees to the Issuer's Board and a board observation right.

Sentiment

Score: 6

Explanation: StockSavvy.ai views this as a neutral to slightly positive development. While the company has emerged from bankruptcy, the significant influence of Redwood Capital and the nature of the exchange (debt for equity/new debt) suggest a complex recovery phase ahead.

Positives

• Redwood Capital Management has secured significant influence over Office Properties Income Trust, with rights to appoint Trustees and a board observer.
• The acquisition of shares and notes occurred as part of a confirmed bankruptcy reorganization plan, indicating a structured resolution.
• The company has emerged from bankruptcy, which can be a positive step towards financial stability and future growth.

Negatives

• The company has undergone Chapter 11 bankruptcy proceedings, indicating significant financial distress.
• The substantial ownership by a single entity (Redwood Capital) could lead to concentrated control and potential conflicts of interest.

Risks

• The company's financial stability post-bankruptcy remains a key concern.
• Potential conflicts of interest may arise due to Redwood Capital's significant influence and board representation.
• Future strategic decisions may be heavily influenced by Redwood Capital's investment objectives.

Future Outlook

The Reporting Persons review their investment in the Issuer on a continuing basis and may take various actions, including acquiring additional shares, disposing of shares, or entering into derivative transactions, depending on market conditions and the Issuer's performance. Redwood Capital has secured rights to appoint Trustees and a board observer, indicating an active role in the company's future direction.

Management Comments

• The Reporting Persons have in the past engaged and expect to continue to engage in discussions with potential strategic partners, acquirers, investment professionals, and potential financing sources.
• The Reporting Persons have in the past considered and may in the future consider a wide variety of matters and plans or proposals that could result in various strategic actions.
• As a result of their ownership interest, the Reporting Persons exercise significant influence over the Issuer's business practices and strategy.

Industry Context

StockSavvy.ai notes that this filing reflects a significant shift in control and influence for Office Properties Income Trust following its bankruptcy. The acquisition of a substantial stake by Redwood Capital, coupled with board representation rights, is a common strategy for activist investors or distressed debt holders seeking to influence the turnaround of a real estate investment trust (REIT).

Comparison to Industry Standards

• In the REIT sector, significant ownership stakes (over 10%) often lead to board representation, as seen here with Redwood Capital's rights to appoint Trustees.
• The structure of receiving new debt and equity in exchange for old debt and claims is standard practice in Chapter 11 reorganizations for real estate companies.
• Board observation rights, granted to major shareholders like Redwood Capital when ownership exceeds 15%, are a mechanism to ensure transparency and provide input, though without voting power.

Management Changes

Corporate Governance

Legal Proceedings

• The company and certain subsidiaries were involved in Chapter 11 bankruptcy proceedings, which have now been confirmed and resolved through a Plan of Reorganization.

Stakeholder Impact

• Shareholders: The existing shareholders have been diluted through the bankruptcy process, and new shareholders (Redwood Funds) now hold a significant stake with board influence.
• Creditors: Holders of the old senior secured notes and DIP claims have converted their holdings into new secured exit notes and common shares.
• Management/Board: The company's board composition and governance structure have been impacted by Redwood Capital's increased influence and board appointment rights.

Next Steps

• Redwood Capital will continue to review its investment and may engage in further discussions or transactions.
• The company will operate under its reorganized structure with potential board influence from Redwood Capital.
• The Issuer will manage its business to qualify as a real estate investment trust.

Key Dates

Recommendation

The company has emerged from bankruptcy, which is a positive step, but the significant ownership by Redwood Capital and the associated board influence introduce a degree of uncertainty regarding future strategic direction and potential conflicts. A 'hold' recommendation allows for observation of the company's post-reorganization performance and Redwood Capital's influence.

Keywords

Office Properties Income Trust, Redwood Capital Management, Schedule 13D, Beneficial Ownership, Bankruptcy Reorganization, REIT, Board Appointment, Secured Exit Notes