Office Properties Income Trust and 72 affiliated debtors are approaching the final stretch of a Chapter 11 reorganization that has been marked by aggressive intercreditor litigation, three rounds of mediation, and a series of global settlements that have reshaped the case. The confirmation hearing is currently scheduled for April 22, 2026, with the voting and objection deadline set for April 15, 2026.

The past several weeks have seen a burst of activity positioning the case for confirmation. On April 5, 2026, the Debtors filed their Notice of Intent to Equitize the DIP Facility, electing to convert the $125 million DIP into reorganized equity rather than requiring cash repayment. On April 8, the Third Amended Plan and First Plan Supplement were filed, incorporating all settlement terms and the equitization election. A day later, the Debtors filed a Second Election Notice identifying nine additional properties for sale.

OPI is a Maryland real estate investment trust formed in 2009 that grew principally through two major acquisitions: the October 2017 acquisition of First Potomac Realty Trust for approximately $1.4 billion and the December 2018 acquisition of Select Income REIT for approximately $2.4 billion. These transactions significantly expanded the property portfolio but also substantially increased the company’s debt burden.

A critical structural feature of OPI is that it has no employees. All management and operational functions are provided by The RMR Group LLC pursuant to management agreements originally dated June 5, 2015. Combined annual management fees totaled approximately $29.6 million in 2024. The RMR relationship raises significant governance concerns: the chair of OPI’s Board is also a director and controlling shareholder of RMR Inc. and Sonesta International Hotels Corporation. These overlapping roles were cited by the Official Committee of Unsecured Creditors as evidence that the “entire fairness” standard should govern scrutiny of the DIP Facility and other transactions.

To address governance concerns, OPI established a Special Committee on June 12, 2025, comprising an Independent Trustee as its sole member, tasked with investigating potential claims arising from prepetition capital structure transactions and RMR-related payments. That investigation remains ongoing.

The CRO Declaration identifies multiple intersecting causes of OPI’s financial distress, all compounding in a way that made the existing capital structure unsustainable.

Structural shifts in office space utilization driven by the proliferation of remote and hybrid work fundamentally reduced demand for traditional office space. Challenging financing markets made refinancing or extending maturing debt increasingly difficult and expensive. Reduced government spending created additional headwinds given OPI’s significant government tenant base. The company’s common shares were delisted from Nasdaq on October 6, 2025, effectively eliminating access to public equity markets.

The Debtors’ prepetition capital structure — aggregating approximately $2,421.3 million in total company funded debt — is organized into multiple secured silos with distinct collateral packages, maturity dates, and lien priorities. This complexity lies at the heart of the intercreditor disputes that have defined the case.

Ninety-seven properties secure approximately $1.9 billion of aggregate debt. The complexity of this multi-silo structure — with separate collateral pools, intercreditor agreements, and lien priorities — is a defining feature of the case.

The restructuring is anchored by a Restructuring Support Agreement executed on the Petition Date with holders of approximately 80–90% of the September 2029 Senior Secured Notes and RMR. The RSA contemplated the provision of a $125 million DIP Facility by the September 2029 Ad Hoc Group, the conversion of September 2029 Notes into reorganized equity, and continued management by RMR on renegotiated terms.

The DIP Facility

The DIP Facility was the most contested element of the case, drawing objections from four distinct parties. The 2027 Ad Hoc Group advanced four principal arguments: that the DIP constituted a value-transfer scheme benefiting the September 2029 Ad Hoc Group at the expense of the 2027 noteholders; that it violated the Intercreditor Agreement; that it operated as an impermissible sub rosa plan; and that it was approved through a flawed governance process lacking independent fiduciaries.

The UCC argued that the DIP should be evaluated under the heightened “entire fairness” standard because RMR is a statutory insider, and that the DIP constituted a sub rosa plan locking in approximately 79.5% of reorganized equity for the September 2029 Ad Hoc Group. BOKF, as trustee for the Subsequent September 2029 Notes, warned that excluding its noteholders from DIP participation constituted discriminatory treatment.

The Debtors countered that business judgment deference was appropriate, that no debtor-by-debtor necessity requirement existed in multi-debtor cases, that equitization merely preserved optionality subject to full confirmation protections, and that the 11-party marketing process validated the pricing. The Final DIP Order was entered on February 3–4, 2026, after a two-day hearing.

The treatment of the approximately $418 million in 3.250% Senior Secured Notes due March 2027 has been the most heavily litigated issue in the case, spawning two adversary proceedings.

OID Adversary (Adv. Proc. No. 25-03802)

Filed November 2, 2025, the Debtors sought to disallow approximately $76.4 million of unamortized original issue discount on the 2027 Notes under §502(b)(2), which disallows claims for “unmatured interest.” The 2027 Notes were issued in December 2024 as part of an exchange transaction at a significant discount to face value, creating substantial OID.

Intercreditor Adversary (Adv. Proc. No. 26-03016)

Filed January 24, 2026, by UMB Bank as 2027 Notes indenture trustee, this proceeding alleged that the DIP Facility and related transactions violated the Intercreditor Agreement executed in connection with the December 2024 Exchange.

The 2027 Ad Hoc Group’s Defenses

The 2027 Ad Hoc Group raised three principal defenses: that the 2027 Notes were validly accelerated approximately seven hours before the Chapter 11 petitions were filed, fully amortizing all remaining OID; that the “solvent debtor” exception under In re Ultra Petroleum Corp. permits recovery regardless; and that as oversecured creditors under §506(b), the 2027 noteholders are entitled to recover post-petition interest including OID accretion.

After three rounds of court-ordered mediation before Judge Marvin Isgur, the parties reached a framework of interlocking settlements that resolved the principal disputes and positioned the case for confirmation.

The 2027 Settlement

The settlement represents a pragmatic resolution. The allowed claim of $385 million falls between the full face amount and the OID-adjusted amount, suggesting each side conceded ground. The 2027 noteholders obtained new secured notes bearing a much higher coupon, near-term cash, and robust collateral protections. Both adversary proceedings are to be dismissed with prejudice on the Effective Date.

The Committee Settlement

Reached February 23, 2026, the Committee Settlement enhanced recoveries for unsecured creditors by increasing the Plan enterprise value to $1.75 billion, upsizing the equity rights offering to $35 million at $17 per share, granting 7-year warrants for 5% of reorganized equity at a $25 strike price, and providing an estimated approximately 9.3% recovery for unsecured noteholders. Trade and vendor claims are to be paid in full in cash.

The Plan has evolved through four iterations, each incorporating progressive settlements and responding to objections raised by the various stakeholder groups.

Classification and Estimated Recoveries

Post-Emergence Releases

The release provisions have been a significant point of contention. The U.S. Trustee objected that nonconsensual third-party releases violate the Supreme Court’s decision in Harrington v. Purdue Pharma. The Debtors responded by implementing an opt-out release mechanism for voting classes and an opt-in mechanism for deemed-to-reject classes (Classes 15 and 16), citing recent authorities upholding opt-out releases post-Purdue Pharma in the Southern District of Texas.

The Revised Valuation Analysis establishes an enterprise value range of $2,050 million to $2,250 million and an implied equity value range of $343 million to $543 million, with a valuation date of May 1, 2026.

Post-Emergence Debt Structure

The Revised Financial Projections project Cash Basis NOI growing from $145.5 million (May–December 2026) to $231.4 million (2030), with Net Debt/EBITDA leverage declining from 7.4x (2027) to 6.3x (2030) and a Debt Service Coverage Ratio improving from 1.5x (2027) to 1.7x (2028–2030). Projected dispositions of $272.9 million in the May–December 2026 period represent a significant portfolio rationalization.

The first property sale involved the Regents Center in Tempe, Arizona, sold to Opus Development Company for $11,037,975. The Motion was filed November 10, 2025, approved December 3, and closed December 19, 2025, establishing both the legal framework and precedent for subsequent sales.

More broadly, the Motion for Global Sale Procedures was filed February 3, 2026, and approved February 25, 2026, establishing a framework for ongoing property dispositions without requiring individual court approval for each transaction. On April 9, 2026, the Debtors filed a Second Election Notice identifying nine additional properties for the broker-marketed sale process — consistent with the $272.9 million in projected dispositions for the May–December 2026 period.

Beyond the intercreditor disputes that dominated the first several months, the case has raised several important doctrinal issues that reflect the evolving landscape of complex Chapter 11 practice.

Business Judgment vs. Entire Fairness

The applicable standard of review for the DIP Facility was a threshold legal issue. The Committee’s argument for entire fairness rested on RMR’s insider status and its benefits under the RSA. The Debtors distinguished the precedent by arguing that the DIP Lenders themselves are arm’s-length parties — the insider (RMR) is not providing the financing. The Court’s entry of the Final DIP Order suggests it found the business judgment standard appropriate.

Sub Rosa Plan Doctrine

The argument that the DIP Facility’s equitization feature and RSA integration impermissibly predetermined the reorganization outcome represents one of the most important doctrinal issues in the case. The Fifth Circuit’s decision in Braniff Airways prohibits transactions that effectively determine the outcome of a reorganization without the procedural safeguards of the plan confirmation process. The Debtors’ counter-argument that equitization is implemented through and subject to the Plan, including Court review under §1129, provides a plausible distinction.

Post-Purdue Pharma Release Framework

The Debtors’ adoption of an opt-out mechanism for voting classes and an opt-in mechanism for deemed-to-reject classes represents a sophisticated attempt to thread the needle between the Supreme Court’s prohibition on nonconsensual third-party releases and the practical necessity of broad releases to effectuate complex restructurings. The citation to In re Container Store Group suggests the Southern District of Texas is developing a post-Purdue Pharma framework that permits opt-out/opt-in releases as “consensual.”

With the confirmation hearing approaching, the positions of the principal stakeholder groups are largely defined by the settlement framework.