Mall operator CBL enters Chapter 11

January 2021  |  DEALFRONT  |  BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

January 2021 Issue

As the retail sector continues to struggle amid the coronavirus (COVID-19) pandemic, shopping mall operator CBL Properties, along with certain other related entities, has filed for Chapter 11 bankruptcy protection in order to reorganise its operations.

CBL is one of many mall operators in the US that have been struggling amid the pandemic as people have stayed at home and resorted to online shopping. Testifying to the struggle, Pennsylvania Real Estate Investment Trust – operator of 19 malls including the largest mall in Philadelphia – filed for Chapter 11 on the same day as CBL.

The company has filed for Chapter 11 so that it may implement a restructuring support agreement (RSA) that will allow it to recapitalise. Throughout the restructuring process, CBL expects all of its day-to-day operations and business of the company’s wholly owned, joint venture and third-party managed shopping centres to continue as normal.

Furthermore, the RSA will provide CBL with a significantly stronger balance sheet by reducing total debt and preferred obligations by approximately $1.5bn, extending debt maturities and increasing liquidity while maintaining operational consistency.

CBL’s cash position, combined with the positive cash flow generated by ongoing operations, is expected to be sufficient to meet its operational and restructuring needs. That said, CBL has filed various customary motions with the bankruptcy court seeking several types of relief to allow it to meet necessary obligations and fulfil its duties during the restructuring process, including authority to continue paying employee wages and benefits, and honouring certain customer and vendor commitments.

Certain subsidiaries, including CBL’s joint ventures and the majority of its special purpose entities holding properties that secure mortgage loans, are not included in the Chapter 11 process. Subject to court approval, CBL anticipates continuing to meet all debt service and other obligations, as required, under its property level secured loans and joint venture partnerships.

“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 Stephen D. Lebovitz, chief executive of CBL.

“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 CBL, noteholders and credit facility lenders during the bankruptcy process,” he added.

Headquartered in Chattanooga, Tennessee, CBL owns and manages a national portfolio of market-dominant properties located in dynamic and growing communities. Its portfolio is comprised of 107 properties totalling 66.7 million square feet across 26 states, including 65 high-quality enclosed, outlet and open-air retail centres and eight properties managed for third parties.

Serving as legal counsel to CBL is Weil, Gotshal & Manges LLP. Moelis & Company is serving as restructuring adviser.

Mr Lebovitz concluded: “With an aggregate of approximately $1.5bn in unsecured debt and preferred obligations eliminated and a significant increase to net cash flow, upon emergence, CBL will be in a better position to execute on our strategies and move forward as a stable and profitable business.”

© Financier WorldwideAs the retail sector continues to struggle amid the coronavirus (COVID-19) pandemic, shopping mall operator CBL Properties, along with certain other related entities, has filed for Chapter 11 bankruptcy protection in order to reorganise its operations.

CBL is one of many mall operators in the US that have been struggling amid the pandemic as people have stayed at home and resorted to online shopping. Testifying to the struggle, Pennsylvania Real Estate Investment Trust – operator of 19 malls including the largest mall in Philadelphia – filed for Chapter 11 on the same day as CBL.

The company has filed for Chapter 11 so that it may implement a restructuring support agreement (RSA) that will allow it to recapitalise. Throughout the restructuring process, CBL expects all of its day-to-day operations and business of the company’s wholly owned, joint venture and third-party managed shopping centres to continue as normal.

Furthermore, the RSA will provide CBL with a significantly stronger balance sheet by reducing total debt and preferred obligations by approximately $1.5bn, extending debt maturities and increasing liquidity while maintaining operational consistency.

CBL’s cash position, combined with the positive cash flow generated by ongoing operations, is expected to be sufficient to meet its operational and restructuring needs. That said, CBL has filed various customary motions with the bankruptcy court seeking several types of relief to allow it to meet necessary obligations and fulfil its duties during the restructuring process, including authority to continue paying employee wages and benefits, and honouring certain customer and vendor commitments.

Certain subsidiaries, including CBL’s joint ventures and the majority of its special purpose entities holding properties that secure mortgage loans, are not included in the Chapter 11 process. Subject to court approval, CBL anticipates continuing to meet all debt service and other obligations, as required, under its property level secured loans and joint venture partnerships.

“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 Stephen D. Lebovitz, chief executive of CBL.

“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 CBL, noteholders and credit facility lenders during the bankruptcy process,” he added.

Headquartered in Chattanooga, Tennessee, CBL owns and manages a national portfolio of market-dominant properties located in dynamic and growing communities. Its portfolio is comprised of 107 properties totalling 66.7 million square feet across 26 states, including 65 high-quality enclosed, outlet and open-air retail centres and eight properties managed for third parties.

Serving as legal counsel to CBL is Weil, Gotshal & Manges LLP. Moelis & Company is serving as restructuring adviser.

Mr Lebovitz concluded: “With an aggregate of approximately $1.5bn in unsecured debt and preferred obligations eliminated and a significant increase to net cash flow, upon emergence, CBL will be in a better position to execute on our strategies and move forward as a stable and profitable business.”

© Financier Worldwide

BY

Fraser Tennant

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