(Bloomberg) – Washington Prime Group, mall owner, is preparing a possible bankruptcy as people become aware of the plans.
The investment trust, which owns about 100 shopping malls in the US, said last month that it would use a 30-day grace period to continue lending. The talks are faltering, say the people, who have asked not to be named and are discussing confidential preparations.
The plan to file protection for Chapter 11 is not final and may change as negotiations develop or the company’s grace period is extended. A representative of Washington Prime declined to comment.
Shares in Washington Prime fell 63% to $ 2.34 after Bloomberg reported the possible submission, resulting in several trades.
Short-term interest in the stock increased more than 30% of the outstanding shares in late 2020, according to Bloomberg data. The stock traded up to $ 7.49 even after the overdraft. Day traders and Reddit investors have started flocking to certain strongly abbreviated names in hopes of making a profit when short sellers cover their bets.
Pandemic impact
Columbus, Washington, based in Ohio, said the impact of the Covid-19 pandemic could affect its ability to meet and continue debt condensing, or remain a going concern “under certain circumstances. ” It is said in November that there is “active negotiation” with debtors to reduce loans.
At that point, CEO Lou Conforti stressed that bankruptcy was not on the table.
“It’s important to note that this action, and I would like everyone to listen, has nothing to do with a bankruptcy or a corporate restructuring, and if it’s anything, it will be a testament to our operational capability, “Conforti said in a conference with investors.
Washington Prime is working with advisers to law firm Kirkland & Ellis and investment bank Guggenheim to handle the term, which includes a loan for the first lien payable in June. In December, it attempted to convert its $ 260 million unsecured bonds into $ 175 million preference shares issued by a new special purpose entity, but was unable to reach an agreement with debtors.
Representatives from Kirkland & Ellis and Guggenheim did not comment.
Read more: DAILY MATTER: Mall REIT’s retail science is a debt problem
The company said the rental collection rate fell to 52% during the second quarter of 2020, dropping the price of its junior debt to about two-thirds of face value and its shares to a cent-share status. In the third quarter, collections improved to about 87%.
The pandemic caused mall owners to struggle to keep up with debt payments because the mandates of stores kept shoppers away and tenants wanted to postpone renting. Two of Washington Prime’s competitors, CBL & Associates Properties and Pennsylvania Real Estate Investment Trust, filed for bankruptcy within hours last year.
Washington Prime’s tenants also include retailers such as JC Penney Co. and former Ann Taylor parent Ascena Retail Group Inc., who sought court protection and closed stores last year, citing pain from the pandemic.
(Stock movement updates in fourth paragraph, previous remarks by CEO in seventh paragraph.)
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