Washington Prime Group, the owner of Kokomo’s Markland Mall and around 100 other malls across the country, has filed for bankruptcy.
The Columbus, Ohio-based company filed for Chapter 11 bankruptcy protection Sunday. The company, in a press release, cited temporary closures and the relaxation of rent payments for its tenants due to the COVID-19 pandemic as the main reason for its bankruptcy filing.
Washington Prime Group says it doesn’t expect its current operations to be immediately affected by the bankruptcy filing in large part because the company acquired $100 million in debtor-in-possession financing to aid operations during the company’s bankruptcy proceedings.
The company’s estimated assets ranged from $1 billion to $10 billion, as did its estimated liabilities, according to a filing made in the United States Bankruptcy Court for the Southern District of Texas.
Chapter 11 bankruptcy isn’t a full liquidation of assets but, in most cases, a reorganization or restructuring of debt. In general, the debtor remains in control of its business operations and is subject to oversight by the court. In most cases, some kind of plan to pay off the debt and continue to operate is established, though that requires approval from both the court and creditors.
According to the filing, the company and its creditors have agreed on a plan that includes swapping unsecured notes for equity, a $190 million paydown of its revolving credit and term loan facilities and a $325 million equity rights offering. In total, the company says it plans to lower its total debt by $925 million.
“The Company’s financial restructuring will enable WPG to right size its balance sheet and position the Company for success going forward,” Lou Conforti, CEO and director of Washington Prime Group, said in a press release. “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.”
Malls across America were struggling before the pandemic, but many retail experts believe the pandemic hastened and compounded the industry’s financial problems. Two other major mall owners — CBL Properties and PREIT — also filed for Chapter 11 protection in the past year.
Washington Prime’s bankruptcy filing comes as no surprise, as reports of the filing were first reported in March by Bloomberg News.
Since then, the company was given multiple extensions to restructure its debt, skipped a $23.5-million interest payment in February and was hit with a class-action lawsuit from California law firm Glancy Prongay & Murray LLP, alleging it had misled investors regarding the financial health of the company’s business.
Washington Prime Group considers Markland Mall a “Tier 1” property, and the mall currently has no debt, according to the earnings report.
For comparison, five other Tier 1 properties were reclassified as non-core properties during the first quarter, and those malls carry a total mortgage balance of approximately $326 million.
Since 2018, the company has invested millions into Markland Mall to demolish the former Sears store and build space for seven new tenants. Those new spaces are now filled by Aldi, PetSmart, OshKosh B’gosh, Carter’s and Prodigy Bar & Grill, Party City and Ross Dress for Less.
Washington Prime owns 12 properties in Indiana, including shopping areas in Muncie, Indianapolis, Lafayette and Mishawaka.