Mall Owner CBL Properties Files Bankruptcy in Bid to Survive

Mall owner CBL & Associates Properties Inc. filed for bankruptcy, blaming the pandemic that’s upended retailers around the world as well as its lenders, who tried to seize rent payments just as the company struck a debt-cutting deal to help it survive.

The bankruptcy filing in federal court in Houston Sunday includes a proposed debt-for-equity swap that would hand unsecured bondholders a 90% stake in CBL in exchange for slashing about $1.4 billion in debt, according to court papers. At the same time, CBL filed a lawsuit against Wells Fargo & Co., the agent representing senior lenders, asking a judge to rule that the bank’s actions in the days before the bankruptcy case were invalid.

The dispute forced CBL to speed up the filing of its bankruptcy case instead of negotiating a broader agreement to help the mall owner deal with Covid-19 related rent losses, CBL said in court papers. More than 30 of its tenants have filed for court protection this year.

A representative for Wells Fargo declined to comment.

Bondholder Bargain

CBL has also asked a judge to let it spend cash that Wells Fargo is holding as collateral for $1.1 billion in loans. That request is likely to be the first in a series of battles between CBL and Wells Fargo and the lenders.

The mall owner, based in Chattanooga, Tennessee, said it owes about $4.5 billion to creditors. In the months leading up to the bankruptcy filing, CBL had warned shareholders that it would file bankruptcy if it failed to get debt relief.

The company first tried to strike a bargain with the bank lenders. When that didn’t work, they turned to bondholders, ultimately signing a restructuring support agreement with investors who hold 62% of the company’s $1.4 billion in unsecured notes, company financial adviser Mark A. Renzi said in court papers. Under that deal, unsecured noteholders will get 90% of reorganized CBL and nearly $50 million in cash in exchange for extinguishing their bonds.

Tenant Pain

CBL employs about 500 people and has around 7,400 tenants located in more than 100 properties, most of which is owns or co-owns.

The company was founded in 1978 by Charles B. Lebovitz and five business associates. Since then, the company has been run by the Lebovitz family, who remain among top shareholders. Under the deal with noteholders, shareholders would get 10% of the reorganized company.

Some of CBL’s biggest renters including J.C. Penney Co. and Ann Taylor parent Ascena Retail Group Inc. have already filed for bankruptcy this year with plans to close stores. Analysts have long predicted a shakeout in malls and strip shopping centers serving less affluent areas, which dominate CBL’s roster.

CBL previously warned investors it was in trouble because tenants weren’t paying their rent.

The case is CBL & Associates Properties, Inc, 20-35226, U.S. Bankruptcy Court, Southern District of Texas (Houston). To view the docket in Bloomberg Law, click here.

©2020 Bloomberg L.P.

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