Washington Prime Group Inc. announced that it and certain of its subsidiaries have filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Texas. The Company enters Chapter 11 after executing a restructuring support agreement (the “RSA”) with creditors, led by SVPGlobal, that hold approximately 73% of the principal amount outstanding of the Company’s secured corporate debt and 67% of the principal amount outstanding of the Company’s unsecured notes (collectively, the “Consenting Creditors”). The Company will utilize Chapter 11 to implement a comprehensive and consensual financial restructuring of the Company’s corporate-level debt that will allow the Company to substantially deleverage its balance sheet and strengthen its business and operations going forward, either through a full equitization of the Company’s unsecured notes or an alternative value-maximizing transaction that would repay, in full in cash, all of the Company’s corporate-level debt.
Importantly, Washington Prime Group has secured $100 million in new money debtor-in-possession financing from the Consenting Creditors to support day-to-day operations during the Chapter 11 process and ensure that all business operations continue in the ordinary course without interruption. Washington Prime Group’s guests, retailers and business partners can expect business as usual at all of the Company’s retail town centers throughout the proceedings.
The RSA provides for a deleveraging of the Company’s balance sheet by nearly $950 million through the equitization of unsecured notes and a $190 million paydown of the Company’s revolving credit and term loan facilities. The RSA contemplates a $325 million equity rights offering, fully backstopped by SVPGlobal, as Plan Sponsor, the proceeds of which will be applied to, among other things, the pay down of secured debt. The RSA also provides for an effective four-year extension of the remaining credit facility debt, payment in full of all claims held by vendors and service providers, and a baseline recovery for the Company’s existing common and preferred equity holders of $40 million in cash or 6.125% of new equity (subject to dilution). Additionally, the RSA allows the Company to market its assets to determine whether any alternative transaction or transactions that would pay existing corporate indebtedness in full, in cash, and deliver greater aggregate recoveries to existing common and preferred equity holders are attainable. The RSA also includes certain milestones, including a 60-day milestone for the Bankruptcy Court to enter an order confirming the Chapter 11 plan, subject to certain extensions.
Lou Conforti, CEO and Director of Washington Prime Group, stated: “The Company’s financial restructuring will enable WPG to right size its balance sheet and position the Company for success going forward. During the financial restructuring, we will continue to work toward maximizing the value of our assets and our operating infrastructure. The Company expects operations to continue in the ordinary course for the benefit of our guests, tenants, vendors, stakeholders and colleagues.”
The COVID-19 pandemic has created significant challenges for many companies, including Washington Prime Group, making a Chapter 11 filing necessary to reduce the Company’s outstanding indebtedness. Throughout the restructuring process, the Company remains committed to serving as a preeminent operator of retail town centers and will continue to serve its guests. Importantly, the Company will continue to prioritize the health and safety of our guests, retailers, employees and communities.
The Company has filed a number of customary first day motions with the Bankruptcy Court that will allow the Company to continue operations in the ordinary course. Certain subsidiaries, including the Company’s joint ventures and the majority of the Company’s special purpose entities holding properties that secure mortgage loans will not be debtors in the Chapter 11 cases. The Company also anticipates continuing to meet all debt service and other financial obligations, as required, under its property-level secured loans and joint venture partnerships.
Kirkland & Ellis LLP is serving as legal counsel to the Company, and Alvarez & Marsal North America, LLC is serving as restructuring advisor. Guggenheim Securities, LLC is serving as the Company’s investment banker. Davis Polk & Wardwell LLP is serving as legal counsel and Evercore Group L.L.C. is serving as investment banker and financial advisor to SVPGlobal. Wachtell, Lipton, Rosen & Katz is serving as legal counsel and PJT Partners LP is serving as investment banker for an ad hoc group of Consenting Creditors.