CBL & Associates Properties Inc. has warned that it could file for bankruptcy.
In a 10-Q filing with the Securities and Exchange Commission, the commercial real estate owner wrote that it could seek Chapter 11 protection after receiving notices of default following its failure to comply with certain covenants under its secured credit facility.
According to the filing, CBL has began discussions with its lenders. However, “failure to reach a consensual resolution of these claims or to complete a refinancing or other restructuring could have a material adverse effect on our liquidity, financial condition and results of operations, which may result in filing a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in order to implement a restructuring plan,” it wrote.
The Chattanooga, Tenn.-based company, which owns 108 malls across the country, 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.
On May 26, June 2, June 16 and Aug. 6, CBL said that it received default claims and reservation of rights letters from the administrative agent under its secured credit facility. Although its lenders have not accelerated the amount due and payable on the loans or started foreclosure proceedings, the mall giant warned that lenders might seek to exercise one or both of these actions in the future.
Amid financial pressures stemming from the COVID-19 pandemic, many retailers have sought to boost their cash flow by skipping out on rent payments, particularly for stores they were forced to shutter due to government orders aimed at stemming the spread of the coronavirus. At the same time, some commercial owners that need to meet their own mortgage terms have said they are 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 their payments.
“The pandemic has accelerated a number of tenant bankruptcies, resulting in an expectation of additional store closures and lost rent through the remainder of the year,” CEO Stephen Lebovitz said in a statement today. “As a result of the difficulty in accurately predicting the impact to our business, we expect our visibility over the next few quarters to remain limited.”
He added, “To date, we have completed or are finalizing negotiations with retailers representing the majority of second-quarter rent … As we complete these negotiations, rent collections have improved with retailers paying all or a portion of past-due amounts as well as paying current rents.”