Mall owner Pennsylvania Real Estate Investment Trust has filed for bankruptcy protection for the second time since 2020, aiming to cut US$880 million in debt and become a privately owned company.
Philadelphia-based PREIT had previously filed for bankruptcy protection during the COVID-19 pandemic, but declines in U.S. retail sales, high inflation and rising interest rates made it difficult for the company to manage its US$1.1 billion in debt, according to the company's Monday court filings in Wilmington, Delaware, bankruptcy court.
PREIT owns 23 properties, including 19 shopping malls, primarily in the Mid-Atlantic region. Some of its most important retail tenants, including JC Penney and Sears, have also filed for bankruptcy in recent years and have closed locations at PREIT shopping malls.
The company sold off some properties before filing for bankruptcy late Sunday, including selling the Cumberland Mall in Vineland, New Jersey, and parcels of land in that state and Virginia.
PREIT's lenders fully support the company's bankruptcy restructuring, and one group of lenders will end up owning the company after agreeing to convert their existing debt into equity shares in the reorganized business, the company said in a Monday statement.
Shareholders will receive a total of US$10 million in the bankruptcy, and existing equity shares will be canceled, according to PREIT.
PREIT intends to emerge from bankruptcy in February 2024, with US$135 million in exit financing provided by investors including asset managers Redwood Capital Management and Nut Tree Capital Management.
"We look forward to quickly emerging from this process as a financially stronger company with the resources and support to continue creating diverse, multi-use property experiences throughout our portfolio," PREIT CEO Joseph Coradino said in the statement.
PREIT intends to fully pay all vendors, employees and other junior creditors during its bankruptcy, and it has lined up $60 million in bankruptcy financing to complete the restructuring, according to court documents.
The case is In re Pennsylvania Real Estate Investment Trust, U.S. Bankruptcy Court for the District of Delaware, No. 23-11974. - Reuters