On Monday, the United States Bankruptcy Court for the District of Delaware confirmed the company’s prepackaged financial restructuring plan, setting it up to emerge from voluntary Chapter 11 in early December, said PREIT, which had filed for bankruptcy on Nov. 1.
Upon emergence, the mall REIT will have access to $130 million of new financing—$20 million less than it was seeking from bank lenders in October before filing for bankruptcy—and its debt maturity schedule will be extended, it said. According to PREIT’s third quarter report, 95 percent of PREIT’s lender group supported the prepackaged restructuring plan.
“We look forward to emerging from this process as a stronger, more innovative platform for our business partners,” said Joseph Coradino, CEO of PREIT, which operates 21 malls across nine states. “We were able to reach this outcome on an expedited basis thanks to the overwhelming support of our lenders, as well as the continued support of our employees, customers, tenants and vendors. We will remain focused on operating safely, responsibly and efficiently while maintaining a strong balance sheet.”
PREIT reached an agreement with more than 80 percent of its bank lenders on Oct. 7, under which the banks would provide an additional $150 million to recapitalize the business and extend its debt maturity schedule. At the time, the company said it would complete this restructuring under Chapter 11—which it is now doing—if it was unable to secure the support of that last 20 percent of lenders.
The mall owner posted a net loss of $0.46 per share in the third quarter, compared to a net gain of $0.22 during the prior year period. Looking at the nine months ending Sept. 30, PREIT reported a net loss of $1.10 per share. During the same period in 2019, it posted a $0.23 net loss per share.
DLA Piper LLP (US) LLP and Wachtell, Lipton, Rosen & Katz are serving as legal counsel and PJT Partners LP is serving as financial advisor to PREIT.
The same day PREIT filed its voluntary Chapter 11 petition, fellow mall owner CBL Properties followed suit. Its restructuring support agreement looks to reduce its total indebtedness and preferred obligations by $1.5 billion, extend debt maturities and increase its liquidity, CBL said.
As coronavirus infections surge and hospitalizations spike across the U.S., retail could be in for yet another wave of economic fallout from the Covid-19 pandemic in the months ahead, if restrictions re-close stores and shopping centers.