PREIT files for Chapter 11, malls to stay open during restructuring
Unable to keep current with its debt obligations, PREIT, owner of 18 regional and super-regional malls, has filed for Chapter 11 bankruptcy protection.
The Philadelphia-based company, which previously filed for bankruptcy in November 2020 during the pandemic, intends to keep its entire mall portfolio in operation, having obtained “debtor in possession” financing from lenders committed to provide PREIT with as much as $60 million.
PREIT has also received a commitment for exit revolver financing of up to $135 million from investors led by Redwood Capital Management and Nut Tree Capital Management. The company also has executed a restructuring support agreement with all of its first- and second-lien lenders and expects to emerge from bankruptcy by February 2024.
“Following the pandemic disruption, PREIT has worked tirelessly to enhance the portfolio, dramatically improve occupancy and diversify its tenancy,” stated PREIT chairman and CEO Joseph F. Coradino in a press release. ”However, unusual economic conditions have limited the company’s options with respect to its debt obligations as meaningful achievements on the operating front were met with inflation and rising interest rates.”
A statement was issued by PREIT’s board of directors supported its restructuring plan noting that it had forged an agreement with key creditors to provide “a $10 million distribution to Preferred and Common shareholders, if certain conditions are met, who otherwise would receive nothing.”
The board stated that the distribution is, in effect, “a gift resulting from voluntary agreement with the existing First and Second Lien Lenders to avoid the expense of protracted Chapter 11 proceedings and shall only be available in the event that the Equity Distribution Conditions are satisfied.”
PREIT has also committed to pay all vendors, suppliers, and employees during the course of the Chapter 11 proceedings.
The mall owner, however, warned that its business could remain challenged due to a long list of possible conditions or events such as tenant bankruptcies, unemployment rates and its their effect on consumer confidence and spending, or its inability to dispose of selling properties.