PREIT, an operator of diverse retail and experiential destinations, reached an agreement with more than 80% of its bank lenders under which the banks will provide an additional $150 million to recapitalize the business and extend the company’s debt maturity schedule.
Under the terms of the agreement, PREIT would have access to $150 million in new capital. The banks will convert the company’s existing credit facilities into a $150 million first lien senior secured facility, a $919 million facility consisting of a first lien senior secured term loan facility and a second lien secured term loan facility, which will have a two-year term with a one-year extension option.
The company’s current pool of unencumbered assets will serve as collateral for the facility and it will retain 30% of proceeds from non-income producing asset sales.
If the company is unable to secure the support of the remaining lenders holding less than 20% of the debt, it may need to complete this restructuring through a prepackaged reorganization under Chapter 11 of the United States Bankruptcy Code. The purpose of such a process, if necessary, would be to implement the agreement that already has the support of more than 80% of the company’s bank lenders. As such, the company expects that any prepackaged reorganization process would be expedited, and that it would have no impact on shareholders, suppliers and other trade creditors, business partners, or other stakeholders, all of whom would be unimpaired.
“Long before the COVID-19 pandemic hit, we began taking meaningful actions to enhance the financial and operational health of the business,” Joseph F. Coradino, CEO of PREIT, said. “These steps have included proactive asset sales, anchor repositioning and redevelopment to significantly minimize our exposure to underperforming assets, as well as, diversifying our tenant base to provide mass-market offerings appealing to shoppers while simultaneously improving the Company’s underlying tenant credit profile. The next phase in our evolution is continuing on the path we have charted to create diverse multi-use ecosystems at our properties marked by a healthy mix of multifamily housing, healthcare services, fulfillment centers, and other uses alongside our robust retail, dining and entertainment lineups. We appreciate the support of our bank lending group, and their collective confidence in our portfolio and the progress we are making in positioning PREIT for long-term success. This agreement provides us with the liquidity to compete effectively, meet our obligations, and continue providing our tenants, customers and communities with the high-quality shopping experience they expect at our properties.
“Given the significant support we have already received from a substantial majority of our lenders, we are confident in our ability to implement the recapitalization agreement quickly and efficiently. We appreciate the support of our bank lenders, tenants, and customers, and above all, we are grateful for the continued dedication of our relentless team of associates at PREIT. We are excited to take another big step forward in positioning PREIT for an even more successful future.”
DLA Piper and Wachtell, Lipton, Rosen & Katz are serving as legal counsel and PJT Partners is serving as financial advisor to PREIT.
PREIT is a publicly traded real estate investment trust that owns and manages properties.