Chattanooga, Tenn. — CBL Properties has struck a deal with its lenders on a restructuring plan that will eliminate $900 million in debt and reduce annual interest expense by $20 million. Although the official press release from CBL did not mention bankruptcy, a representative from the company told the Chattanooga Times Free Press that the company plans to use the Chapter 11 bankruptcy process to complete the restructuring.
The announcement follows the company’s August 18 second-quarter earnings call, where CBL revealed that it had drawn down its entire revolving credit facility, experienced $215.3 million in losses over the first half of the year, and expected to enter foreclosure proceedings on four malls. Those properties include Park Plaza in Little Rock, Ark., with $77.6 million in outstanding debt; Hickory Point in Forsyth, Ill., with $27.4 million outstanding; EastGate Mall in Cincinnati with $31.9 million outstanding; and Burnsville Center in Minneapolis with $64.5 million outstanding.
In addition, CBL is in discussion with lenders about restructuring or extending a $64.5 million loan on Greenbrier Mall in Chesapeake, Va.; a $63 million loan on Asheville Mall in Ashville, N.C.; and a $131.5 million loan on Oak Park Mall in Overland Park, Kan.
The loan restructuring announced on August 19 would eliminate the approximately $1.4 billion principal amount of CBL’s unsecured notes in exchange for the issuance of $500 million of new senior secured notes due June 2028, approximately $50 million of cash and approximately 90% of the new common equity of the company to holders of the unsecured notes.
“Reaching this agreement with our noteholders is a major milestone for CBL,” says Stephen Lebovitz, chief executive officer of CBL. “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.
“Our goal is for this process to proceed as smoothly and as quickly as possible with no disruption to CBL’s operations. Once the process is complete, we will emerge as a stronger and more stable company, with an enhanced ability to execute on our key strategies of diversifying our sources of revenue and transforming our properties from traditional enclosed malls to suburban town centers.”
CBL briefly was in a forbearance period last month after skipping its July 1 and July 15 interest payments. However, on August 5 the company elected to pay the $30.4 million owed, bringing it up to date on interest payments. The company says it currently has $220 million in cash on hand and plans to continue paying its loans as it restructures its debt. It expects the in-court procedure to begin by October 1.
Based in Chattanooga, CBL’s portfolio comprises 108 properties totaling 68.2 million square feet across 26 states.
Like many mall owners nationwide, CBL has struggled as e-commerce takes a bigger and bigger portion of retail sales.
— Jeff Shaw