CBL Properties announced that the Company has entered into a Restructuring Support Agreement (the “RSA”) with certain beneficial owners and/or investment advisors or managers of discretionary funds, accounts, or other entities (the “noteholders”) representing in excess of 57% of the aggregate principal amount of the Operating Partnership’s 5.25% senior unsecured notes due 2023 (the “2023 Notes”), the Operating Partnership’s 4.60% senior unsecured notes due 2024 (the “2024 Notes”) and the Operating Partnership’s 5.95% senior unsecured notes due 2026 (the “2026 Notes” and together with the 2023 Notes and the 2024 Notes, the “Unsecured Notes”).
The terms of the RSA provide for a comprehensive restructuring of the Company’s balance sheet (the “Plan”) through an in-court process contemplated to commence no later than October 1, 2020. The Company intends to continue collaborative negotiations with its senior, secured lenders in the meantime to attempt to reach a consensual arrangement with those lenders. In the event that such an arrangement were reached, the Company would amend the RSA to include its senior secured lenders. The agreement may be amended by the Company and with the consent of noteholders representing at least 75% of the Unsecured Notes that are held by noteholders that are party to the RSA.
The Plan would eliminate the approximately $1.4 billion principal amount of Unsecured Notes in exchange for the issuance of $500 million of new senior secured notes due June 2028, approximately $50 million of cash and approximately 90% of the new common equity of the Company to holders of the Unsecured Notes. As a result, the Plan, if implemented, will result in the elimination of approximately $900 million of debt, extension of the Company’s debt maturity schedule and a reduction in annual interest expense of more than $20 million. The Plan also contemplates eliminating the Company’s more than $600 million obligation on its preferred stock in exchange for new common equity and warrants. In sum, the Plan will provide the Company with a significantly stronger balance sheet by reducing total debt, extending debt maturities and increasing liquidity while minimizing operational disruptions.
Through this process, all day-to-day operations and business of the Company’s wholly owned, joint venture and third-party managed shopping centers will continue as normal. CBL’s customers, tenants and partners can expect business as usual at all of CBL’s owned and managed properties.
“Reaching this agreement with our noteholders is a major milestone for CBL,” said Stephen D. Lebovitz, Chief Executive Officer of CBL. “The agreement will significantly improve our balance sheet by reducing leverage and increasing net cash flow and will simplify our capital structure, providing enhanced financial flexibility going forward.
“We also appreciate the confidence in the CBL organization and leadership team shown by the noteholders as we’ve worked collaboratively to find a solution that benefits all company stakeholders. Our goal is for this process to proceed as smoothly and as quickly as possible with no disruption to CBL’s operations. Once the process is complete, we will emerge as a stronger and more stable company, with an enhanced ability to execute on our key strategies of diversifying our sources of revenue and transforming our properties from traditional enclosed malls to suburban town centers. As a result, we will be better positioned to grow our business over the near and long term.”
CBL currently has approximately $220 million in cash on hand and available for sale securities. The Company’s cash position, combined with positive cash flow generated by ongoing operations, is expected to be sufficient to meet CBL’s operational and restructuring needs.
Certain subsidiaries, including CBL’s joint ventures and CBL’s special purpose entities holding properties that secure mortgage loans, are not contemplated to be included as part of the in-court process. CBL anticipates continuing to meet all debt service and other obligations, as required, under its property level secured loans and joint venture partnerships.