One of the country’s biggest mall owners is preparing to file for bankruptcy.
CBL & Associates Properties Inc. announced today that it has entered into a restructuring support agreement with its lenders that would erase about $900 million of debt and at least $600 million other financial obligations. According to a filing with the Securities and Exchange Commission, the terms of the deal provide for a “comprehensive restructuring” of its balance sheet through an in-court process Chapter 11 process expected to begin by Oct. 1.
With the new agreement, the Chattanooga, Tenn.-based company — which plans to continue all day-to-day operations as usual — aims to build a “significantly stronger” balance sheet by reducing total debt, extending debt maturities and improving liquidity “while minimizing operational disruptions.”
Ultimately, it intends to eliminate approximately $1.4 billion of its unsecured notes — in exchange for $500 million in new senior secured notes due June 2028, $50 million in cash and roughly 90% of the new common equity to holders of the unsecured notes.
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Yesterday, CBL warned that it had received notices of default following its failure to comply with certain covenants under its secured credit facility. It also expressed “substantial doubt that we will continue to operate as a going concern” within one year after the date of its financial statements for the six months ended June 30.
The commercial real estate giant, which owns 108 shopping centers across the country, has faced mounting financial pressures stemming from the COVID-19 pandemic: As retailers sought to maintain their cash flow by skipping out on rent payments, some commercial owners — who need to meet their own mortgage terms — have been forced to take legal action against their tenants in order to recoup payments and keep their own businesses afloat.
In a filing on June 5, CBL noted that most of its occupants have requested rent relief: In April, it collected about 27% of rent payments and expected to receive roughly 25% to 30% of rents in May. It had also put a number of tenants in default for not making payments.