Mall owner CBL Properties expects to file for bankruptcy

[TENNESSEE] Mall owner CBL Properties is planning to file for bankruptcy, a victim of dwindling foot traffic, shuttered retail space and rents too low to cover more than US$3 billion in debt.

The company said in a statement it reached an agreement with some of its creditors to hand control to holders of its unsecured notes. The company said it will keep negotiating with senior lenders and others who haven't signed onto the deal. As currently envisioned, the "in-court process" would eliminate US$900 million of debt.

CBL previously warned investors it was in trouble because tenants weren't paying their rent. The malls are expected to stay open during the court process.

Any bankruptcy filing would come no later than Oct 1 and would likely be funded by the US$220 million in cash that CBL says is enough to keep operating and pay for the restructuring. The company's joint ventures and special-purpose units that hold property with mortgages on them won't be part of the proposed bankruptcy, CBL said. Those businesses will keep paying their debts as usual.

Members of the company's founding family are major stakeholders and Stephen D Lebovitz, son of the co-founder, is chief executive officer. Under the proposed restructuring, common and preferred stockholders would share 10 per cent of the reorganised company. Such deals must be approved by a bankruptcy judge after creditors have a chance to vote.

Analysts have long predicted a shakeout in malls and strip centres serving less affluent areas, which dominate CBL's roster of more than 100 properties in 26 states. The company has struggled to counter the loss of anchor stores such as Sears and JC Penney and mainstays like Forever 21 as retailers went bankrupt or cut back on stores amid shopper defections to online merchants.

To fill empty space, CBL reached out to non-traditional tenants, including fitness centres, restaurants, medical offices and casinos. But the Chattanooga, Tennessee-based company lacked the cash to invest in attracting shoppers and the more innovative tenants, according to Bloomberg Intelligence.

Then came the coronavirus outbreak, which forced CBL to temporarily close 68 malls it owns or manages. CBL collected just 27 per cent of billed cash rents in April and likely will get 25 per cent to 30 per cent of May rents, based on preliminary receipts and conversations with retailers, the company said previously.

CBL could portend a wave of mall-related defaults. Shopping centres were under stress well before the pandemic broke out because consumers were increasingly buying online, leading to bankruptcies of department stores and apparel chains. A survey of 2,200 US adults conducted by Bloomberg News and Morning Consult in late June found that more than half don't feel safe inside shopping centres even as lockdowns lift.

BLOOMBERG