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PREIT and CBL: First Two Mall Casualties of Covid-19

Covid-19 has toppled two mall owners into bankruptcy.

Pennsylvania Real Estate Investment Trust and CBL Properties are the first and second mall operators, respectively, to restructure operations under voluntary Chapter 11 petitions.

PREIT on Sunday filed its Chapter 11 petition in Delaware to put into effect a prepackaged plan backed by 95 percent of its voting lenders. The banks have also committed to an additional $150 million to recapitalize the business and extend the company’s debt maturity schedule, said PREIT, which operates 21 malls across nine states.

The agreement with lenders was signed on Oct. 7, according to a regulatory filing with the Securities and Exchange Commission last month.

CBL on Monday filed its Chapter 11 petition in Houston. It too has a restructuring support agreement (RSA) with certain lenders, which was signed on August 18. CBL said that the plan restructures its balance sheet and reduces its total indebtedness and preferred obligations by $1.5 billion, extends debt maturities and increases its liquidity.

“After months of discussions and consideration of a number of alternatives, CBL’s management and the board of directors firmly believe that implementing the comprehensive restructuring as outlined in the RSA through a Chapter 11 voluntary bankruptcy filing will provide CBL with the best plan to emerge as a stronger and more stable company,” said CBL CEO Stephen D. Lebovitz. “We have continued negotiations with the lenders under our secured credit facility since the signing of the RSA and expect further discussions in an effort to reach a tri-party consensual agreement between the company, noteholders and credit facility lenders during the bankruptcy process.”

Word surfaced in June that CBL could be among the first mall REITs to file for Chapter 11 bankruptcy court protection after it issued a going-concern warning that month. Mall REITS have had a tough time in the wake of the coronavirus pandemic, which forced all nonessential retailers to shut their doors in mid-March. Mall tenants since then have been in discussions with landlords either for rent deferrals or abatement. Some tenants, such as anchor J.C. Penney, which operates 47 stores within CBL’s portfolio, have also filed for Chapter 11 protection.

Separately, in other REIT news, Penney’s two largest landlords—Simon Property Group and Brookfield Asset Management—will be in bankruptcy court on Monday for a sale hearing to find out if the bankruptcy judge gives them the nod of approval to acquire the bankrupt mass merchant’s operating business.