(Bloomberg) -- Washington Prime Group Inc., a real estate investment trust that operates enclosed malls and strip centers across the U.S., filed for bankruptcy after the Covid-19 pandemic drove away shoppers.
The Chapter 11 filing in Houston lets Washington Prime stay in business while it restructures its debts in a deal that it reached with certain creditors, according to the bankruptcy petition. The company, with assets estimated at $4 billion and debt of almost $3.5 billion, secured a bankruptcy loan of up to $100 million to fund operations during court proceedings.
Rent collections dried up and tenants filed for bankruptcy or went out of business as the pandemic spread around the nation in 2020. The Columbus, Ohio-based company, which has about 100 locations, began negotiating with its creditors last year and skipped a $23 million bond interest payment in February. Creditors had been extending a forbearance agreement amid the debt talks.
Still, Washington Prime’s share price surged in recent weeks as it was whipped into the frenzy of trading around meme stocks popular among retail investors and on Reddit message boards. The stock rose as high as $6.98 last week, from a price closer to $2 earlier this year. Trading was halted on Monday as investors digested news of the bankruptcy.
Washington Prime aims to deleverage its balance sheet by nearly $950 million, according to a company statement. The plan 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.
The plan has support from creditors that hold about 73% of the principal outstanding of secured corporate debt and 67% of the unsecured notes. Bloomberg News previously reported that Washington Prime was weighing a bankruptcy filing as talks faltered.
The case is Washington Prime Group Inc., 21-31948, U.S. Bankruptcy Court for the Southern District of Texas (Houston).
--With assistance from Finbarr Flynn and Ken McCallum.