Mall owner Washington Prime Group Inc. filed for Chapter 11 bankruptcy protection late Sunday, citing the COVID-19 pandemic for making the move necessary.
The company, which spun off from the nation’s largest mall operator, Simon Property Group in 2014, currently has 102 shopping centers, according to documents filed in the U.S. Bankruptcy Court for the Southern District of Texas. Washington Prime is based in Columbus, Ohio.
Several retailers – some with locations in Washington Prime properties – have filed and exited bankruptcy since May 2020 amid the pandemic, including Christopher & Banks, Guitar Center, New York & Company, J.C. Penney, Stein Mart, Sur La Table, Ascena Retail Group and Tuesday Morning. The bankruptcies have included store closings.
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“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,” Washington Prime Group said in a news release.
The mall operator’s bankruptcy doesn’t come as a surprise. In public filings, Washington Prime has said it was in talks with creditors to restructure its finances and that it might seek bankruptcy protection.
In announcing its bankruptcy filing, the company said it secured $100 million in “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.”
Lou Conforti, CEO and director of Washington Prime Group, said in the release the restructuring would enable the company to “right size its balance sheet and position the Company for success going forward.”
Washington Prime listed assets of $4.03 billion and debts of $3.47 billion in court documents.
The company said its restructuring agreement with its creditors, led by its largest, SVPGlobal, allows it to deleverage its balance sheet by $950 million. In addition, Washington Prime Group and SVPGlobal anticipate an equity offering of $325 million as part of the restructuring.
The agreement also includes some milestones, including a 60-day target for the court to enter confirm the Chapter 11 plan.
Will shopping malls close?
Like other mall operators, Washington Prime saw its revenue hammered last year by tenants who were unable to pay full rent or closed during the pandemic, as shoppers turned to online instead of in-person purchases.
More than 40 major retailers declared bankruptcy and more than 11,000 stores were announced for closure in 2020, which beat past store closings records.
But malls were struggling before the pandemic.
Experts have said the crisis might hasten the closure of underperforming malls and the repurposing of many centers that remain open. Ultimately, 1 in 4 malls and as many as 1 in 2 could eventually go out of business, according to projections by Coresight Research analysts and executives.
Coresight, which tracks retail closures, projected in 2020 that about 25% of America’s malls would disappear within the next three to five years.
That could rise to as many as 50% “if we can’t stop the bleeding,” Coresight CEO Deborah Weinswig said in an interview with USA TODAY last summer. “That ends up changing the face of America.”
In November, two companies, CBL Properties and PREIT, which together own 130 shopping centers, filed for Chapter 11.
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Contributing: Nathan Bomey and Charisse Jones, USA TODAY; Jim Weiker, The Columbus Dispatch