Mall Owner Washington Prime Said To Prepare Bankruptcy Filing

(Bloomberg) – Mall owner Washington Prime Group is preparing a potential bankruptcy filing as time runs out to avoid a default after it defaulted on interest on its debt, according to people with knowledge of the plans.

The real estate investment trust, which owns about 100 shopping malls across the United States, said last month that it would use a 30-day grace period to continue negotiations with its lenders. However, those conversations are tentative, said the people, who asked not to be named about the confidential preparations.

The plan to file for Chapter 11 protection is not final and could change if negotiations evolve or the company’s grace period is extended, the people added. A representative for Washington Prime declined to comment.

Shares of Washington Prime sank as much as 63% to $ 2.34 after Bloomberg reported on the possible presentation, prompting multiple trading stops.

Short interest in shares grew in late 2020, surpassing 30% of shares outstanding in October, according to Bloomberg data. The stock continued to trade as high as $ 7.49 even after the missed debt payment. Daily traders and Reddit investors began flocking to certain very short names in hopes of making a profit when short sellers hedged their bets.

Pandemic impact

Columbus, Ohio-based Washington Prime has said the impact of the Covid-19 pandemic could affect its ability to honor debt covenants and continue operations, or remain a going concern “under certain circumstances.” He said in November that he was “actively negotiating” with debt holders to cut loans.

At the time, CEO Lou Conforti emphasized that bankruptcy was not on the table.

“It is important to note that this action, and I would like everyone to listen, in no way has anything to do with a bankruptcy or corporate restructuring and, in any case, it will serve as a testimony to our operational capacity”, Conforti. he said on a conference call with investors.

Washington Prime has been working with advisers from the law firm Kirkland & Ellis and the investment bank Guggenheim to help you manage your maturities, which include a first-lien term loan due in June. In December, it tried to convert about $ 260 million of its unsecured bonds into $ 175 million of preferred shares issued by a new special-purpose entity, but failed to reach an agreement with the debt holders.

Representatives for Kirkland & Ellis and Guggenheim did not comment.

Read more: DIFFERENT DAILIES: Mall REIT’s retail bet has a debt problem

The company said its rent collection rate dropped to 52% during the second quarter of 2020, dragging the price of its junior debt to about two-thirds of face value and its shares to penny-stock status. In the third quarter, collections improved to around 87%.

The pandemic has left shopping center owners struggling to keep up with debt payments as mandatory store closures kept shoppers away and tenants sought rental deferrals. Two of Washington Prime’s competitors, CBL & Associates Properties and Pennsylvania Real Estate Investment Trust, filed for bankruptcy within hours of each other last year.

Washington Prime tenants also include retailers such as JC Penney Co. and Ann Taylor’s former parent Ascena Retail Group Inc., which sought court protection and closed stores last year, citing pain from the pandemic.

(Updates with movement of shares in the fourth paragraph, previous comments of the CEO in the seventh paragraph).

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