Struggling mall owner CBL Properties intends to file a pre-packaged Chapter 11 bankruptcy to eliminate some $1.5 billion of debt under a plan the company says creditors holding 57 percent of its obligations have already approved.
“Reaching this agreement with our noteholders is a major milestone for CBL,” CBL CEO Stephen Lebovitz said in a statement announcing the plan. “The agreement will significantly improve our balance sheet by reducing leverage and increasing net cash flow, and will simplify our capital structure, providing enhanced financial flexibility going forward.”
CBL plans to file Chapter 11 by Oct. 1. A proposed restructuring plan will exchange $1.4 billion of existing unsecured notes for $500 million in new senior-secured notes due June 2028, plus some $50 million in cash and about 90 percent of the company’s new common stock.
The company said in a fact sheet that whether investors who hold the firm’s existing stock — which will presumably be wiped out — will receive anything “will ultimately be determined in connection with the court-supervised Chapter 11.”
CBL said it intends to continue business as usual during bankruptcy, retaining its current management, honoring all contracts going forward and keeping its malls open where allowed to amid COVID-19 shutdowns.
“All CBL’s properties have reopened in accordance with the latest guidance from state and local governmental orders and will continue to operate as normal,” Lebovitz said. “Visitors to our properties will not notice any change in our operations.”
The mall owner added that it has roughly $220 million in cash and securities available for sale. CBL said it expects that plus the positive cash flow created by continuing operations should represent enough to meet its operational and restructuring needs.
CBL’s portfolio includes 108 properties throughout 26 states, including North Carolina’s Cross Creek Mall, Pennsylvania’s Westmoreland Crossing and Texas’ Pearland Town Center.
The company’s bankruptcy comes at a time when malls and their owners are struggling from COVID-related closures on top of a longrunning decline in consumer interest in shopping centers.
A recent study estimated the pandemic will by 2021’s end kill roughly 50 percent of the department stores that anchor U.S. malls. The Green Street Advisors survey said that of the approximately 1,000 U.S. malls, roughly 60 percent of them showcase big department stores like Macy’s as anchor tenants.
But such retailers were suffering even before COVID-19 hit. Coresight Research recently found that more than 9,300 U.S. brick-and-mortar stores shuttered in 2019. That beat the previous record of 6,900 closures in 2017.