Washington Prime Group 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.
Washington Prime Group entered Chapter 11 after executing a restructuring support agreement 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. Washington Prime Group will utilize Chapter 11 to implement a financial restructuring of its corporate-level debt, which will allow the company to deleverage its balance sheet either through a full equitization of the company’s unsecured notes or an alternative transaction that would repay, in full in cash, all of the company’s corporate-level debt.
Importantly, Washington Prime Group 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 Washington Prime Group’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 Washington Prime Group’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.
“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. “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.”
Washington Prime Group filed 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 expects to continue to meet all debt service and other financial obligations, as required, under its property-level secured loans and joint venture partnerships.
Kirkland & Ellis is serving as legal counsel to Washington Prime Group and Alvarez & Marsal North America is serving as restructuring advisor. Guggenheim Securities is serving as the company’s investment banker. Davis Polk & Wardwell is serving as legal counsel and Evercore Group is serving as investment banker and financial advisor to SVPGlobal. Wachtell, Lipton, Rosen & Katz is serving as legal counsel and PJT Partners is serving as investment banker for an ad hoc group of consenting creditors.