Judge clears mall-owner PREIT’s restructuring plan with lenders, clearing path out of bankruptcy
The plan could be enacted as soon as the end of this week, allowing PREIT to emerge from bankruptcy in time for the year’s major shopping season at its malls.
PREIT, owner of such retail centers as Fashion District Philadelphia and the Cherry Hill Mall, has won court approval for a bankruptcy plan it hopes will provide the financial flexibility it needs to complete a business overhaul that involves redeveloping some of its malls and selling parts of others.
Judge Karen B. Owens in the U.S. Bankruptcy Court in Wilmington said at a Monday hearing that she would approve a Chapter 11 reorganization plan that permits PREIT to borrow up to an additional $130 million and relaxes its deadlines to repay almost $1 billion in existing debt.
In exchange for the debt revamp, properties that PREIT now owns free and clear will be converted into collateral for its lenders.
The plan could be enacted as soon as the end of this week, Richard A. Chesley, an attorney representing PREIT in the case with law firm DLA Piper, said during the hearing. That would allow PREIT to emerge from bankruptcy in time for the year’s major shopping season at its malls.
“This result, in the midst of the Christmas holiday shopping season, is a testament to all parties’ extraordinary efforts to reach a consensual restructure,” Chesley said.
Shares of Pennsylvania Real Estate Investment Trust, as PREIT is formally known, closed at $1.10 on Monday, down 3.5% from their close on Friday.
PREIT is the biggest mall owner in Philadelphia and its surrounding counties, with properties that include Willow Grove Park and Plymouth Meeting Mall, in addition to the Fashion District and Cherry Hill malls.
It and other mall landlords had been rapidly losing retail-market share to e-commerce sites such as Amazon when the coronavirus hit, devastating their already suffering businesses.
The company said last month that it was working to bring all of its creditors into agreement on a restructuring proposal that at the time had called for $150 million in new borrowing, somewhat more than the $130 million in the plan submitted for approval Tuesday.
When one creditor holding 5% of PREIT’s debt declined to back the plan last month, the company filed its Chapter 11 petition on Nov. 1, aiming to have the plan confirmed by a bankruptcy court judge.
That lender, investment-firm Strategic Value Partners, later dropped its objection in exchange for concessions that included repayment of legal and financial-adviser fees related to its challenge, clearing the way for the plan’s approval.
“We look forward to emerging from this process as a stronger, more innovative platform for our business partners,” PREIT chief executive Joseph F. Coradino said in a release after the hearing.