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Unique: Washington Prime to file chapter as quickly as this week

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© Reuters.

By Mike Spector

NEW YORK (Reuters) – The owner of the Washington Prime Group (NYSE 🙂 Inc mall is preparing to file for bankruptcy protection earlier this week after the COVID-19 pandemic forced it to close some of its 100 or more malls in the United States to temporarily close companies could not pay the rent, said people familiar with the matter.

Founded in 2014 after a spin-off from mall giant Simon Property Group Inc (NYSE :), the Columbus, Ohio-based company owns real estate that includes open-air urban centers and closed-air malls, with about a third in the Midwest concentrated. Tenants include branded retailers marginalized by the pandemic, such as JC Penney Co Inc, which filed for bankruptcy last year. Other tenants include retailers who borrowed money last year to bolster their finances during the crisis, such as Bettbad & Beyond Inc (NASDAQ 🙂 and Macy’s Inc. (NYSE 🙂

Considering that the real estate mutual fund is considering a Chapter 11 court reorganization to revise approximately $ 4 billion in debt marks the youngest company in the broader retail landscape to collapse amid a global public health crisis, kept US shoppers at home for months.

The US economy is now recovering strongly with more than 140 million Americans fully vaccinated and businesses reopening. Nonetheless, previous government stay-at-home orders and shop closings, designed to slow the pandemic, have hurt the bottom line of many retailers and put their ability to pay rent to landlords like Washington Prime at risk. Other shopping mall owners such as CBL & Associates Properties Inc and Pennsylvania Real Estate Investment (NYSE 🙂 Trust filed for bankruptcy last year.

Washington Prime did not immediately respond to a request for comment.

The company could be put up for sale along with the expected bankruptcy filing, one of the sources said. It is in talks for something called self-debt financing of around $ 100 million to support operations during bankruptcy proceedings, the source said.

The amount of funding will depend on whether Washington Prime enters into a debt rescheduling agreement with creditors prior to filing for bankruptcy or needs to continue negotiations during the legal process. In that case, it could approach $ 150 million, the source added.

Washington Prime has stated in public filings that it is in talks with creditors to restructure its finances and may need to file for bankruptcy protection.

The company has not yet made a final decision on whether it will file for bankruptcy protection, some of the sources said. The timing of any bankruptcy filing could shift depending on the progress of ongoing talks with creditors, these sources said.

Washington Prime is currently working under an expiring deferral arrangement with bondholders and lenders Monday (NASDAQ 🙂 night. The agreement has been renewed several times since Washington Prime skipped an interest payment of $ 23.2 million on bonds due on February 15.

Discussions have dragged on as negotiators grapple with Washington Prime’s improved business prospects and the potential for creditors to achieve better financial recoveries, sources familiar with the process said. Washington Prime stock soared before falling earlier in the year and saw another brief spike in early June.

Talks include investment firm SVPGlobal, which is among Washington Prime’s largest creditors, the sources said.

SVPGlobal declined to comment.

The aftermath of last year’s pandemic forced Washington Prime to shut down some properties for a while and ease rent collection from its tenants, which put pressure on the mall owner’s finances. During the 2020 pandemic, Washington Prime rental income plummeted approximately $ 127 million from 2019 levels due to the pandemic.

For the first three months of this year, Washington Prime rental income was approximately $ 20 million compared to the same period in 2020. Cash flow from operations for the three months ended March was $ 3.3 million, a decrease of $ 10 million during the same period in 2020.

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