U.S. mall owner CBL & Associates announced Wednesday it has reached a restructuring support agreement with debt holders — a bid to boost its balance sheet with its malls getting hammered by the Covid-19 crisis.
The Chattanooga, Tennessee-based real estate investment trust, which owns more than 100 retail centers, said in a securities filing that the terms of the agreement provide for a "comprehensive restructuring" of its capital through an in-court process expected to begin by Oct. 1. It would slash about $900 million of debt and at least $600 million of other obligations, the company said.
CBL said it ultimately plans to eliminate roughly $1.4 billion of its unsecured notes in exchange for $500 million of new senior secured notes due in June 2028, about $50 million of cash and roughly 90% of the new common equity in the REIT to holders of the unsecured notes.
All day-to-day operations and business will continue as normal during the restructuring process, the company added.
"Reaching this agreement with our noteholders is a major milestone for CBL," Chief Executive Stephen Lebovitz said in a statement. "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 said it has about $220 million in cash on hand, which should be enough to meet its operational and restructuring needs.
Many had expected CBL would be the first publicly traded mall owner to file for bankruptcy during the pandemic, highlighting the stresses the industry is facing.
CBL had entered into a forbearance period with its lenders on July 1 after skipping millions of dollars in interest payments. It did not make an $11.8 million payment on June 1 on its 2023 notes. Then, on June 16, CBL said it would not make an $18.6 million interest payment due that week on unsecured notes due 2026.
On Aug. 5, however, the company elected to make the $30.4 million in interest payments, keeping it current on all of its unsecured debt.
CBL, like its peers, has been crippled by the Covid-19 crisis. The pandemic temporarily forced many of its retail properties to shut. Many of CBL's tenants, including apparel brands and department stores, have not been paying rent in full due to shrinking sales. Some CBL tenants have also filed for bankruptcy, with permanent retail store closures quickly mounting by the thousands.
CBL shares, which trade under $1, have tumbled more than 81% this year.