Chattanooga mall owner CBL says agreement paves way for bankruptcy restructuring

Staff photo by Mike Pare / Shoppers enter Northgate Mall in Hixson. The center is owned and operated by Chattanooga-based CBL & Associates Properties Inc.
Staff photo by Mike Pare / Shoppers enter Northgate Mall in Hixson. The center is owned and operated by Chattanooga-based CBL & Associates Properties Inc.

Nearly five months after filing for bankruptcy protection, CBL Properties officials believe a new agreement with key lenders will pave the way for the company to return to growth moving ahead.

"That's the point. That's what we're trying to get to," said Stephen Lebovitz, the shopping center company's chief executive. "This [agreement] is the key to get the deal structure set so we have a sense what the balance sheet looks like when we come out of this."

On Monday, the Chattanooga company that operates Hamilton Place and Northgate malls in the city, among more than 100 centers nationally, said it had reached an agreement with a bank group involving more than $1 billion previously loaned to CBL.

Over the next several months, CBL officials hope to hit several bankruptcy court milestones in the new agreement and lead the longtime builder and operator of shopping centers to emerge from Chapter 11 protection by Nov. 1 as an outside target date.

"This agreement is a major step forward for CBL's restructuring plan," Lebovitz said. "Reaching a fully consensual plan between our credit facility lenders and noteholders has been a primary goal throughout this process."

In a telephone interview Monday, the CEO said the new agreement will help provide CBL with the capital needed to re-invest in its properties.

On Monday, CBL stock traded over the counter soared 74.36% after the release of the agreement to close at 13.53 cents per share.

In the future, Lebovitz said, CBL plans to issue new shares and remain a publicly traded real estate investment trust. The exchange hasn't been determined yet, he said.

The action halts a trial that had begun in U.S. Bankruptcy Court in Houston in early February involving a group of lenders led by Wells Fargo Bank, National Association, in a dispute over the loans.

According to CBL, the new agreement is a comprehensive settlement of substantially all key issues, including the litigation.

CBL's new agreement wipes away a total of more than $1.6 billion of debt with the approval already in hand of over 88% of voting bank lenders and 64% of voting noteholders, the company said.

"It definitely lightens our debt load dramatically," said Lebovitz.

Jim Campbell, chief investment officer and managing partner of Campbell Rooks Wealth Management in Chattanooga, said the bankruptcy court still needs to give its approval.

But, Campbell said, even after CBL emerges from bankruptcy, it will still have "a significant amount of debt." He said the question for CBL is "what size is the right size going forward."

He said he believes CBL will try to "opportunistically" sell some of its properties.

Lebovitz said the company already sold about two dozen properties over the last five years as it winnowed its portfolio of poorer-performing sites so it could spend more on other locations.

"We're not planning to sell more at this time or scale down operations at all," he said.

Lebovitz said CBL employs about 220 people in Chattanooga and roughly 500 overall.

CBL spokeswoman Stacey Keating said traffic in its malls and other centers is continuing to rebound as more states open up their economies while pandemic infection numbers improve.

"We're definitely seeing evidence of people wanting to get out, to shop, to eat out," she said.

With more people receiving federal government stimulus checks, she's hopeful they'll spend and put it back into the nation's economy.

"The outlook is more optimistic than it has been," Keating said.

Lebovitz said plans are to bring in new uses to its properties, such as it has done at Hamilton Place with Cheesecake Factory, Dave & Buster's and the Aloft Hotel, which is to open in June.

"We want to broaden the mix of what customers can take advantage of on our properties," he said. "That's the suburban-town center mantra we've taken on."

CBL filed for bankruptcy protection Nov. 1 after the company was hit by the coronavirus pandemic along with the shift by many shoppers to online retailers.

The pandemic ravaged revenues at its centers due to last March's lockdown, store closings, and a slow return to face-to-face shopping.

But even before the outbreak, CBL was grappling with the changing tastes of shoppers when it comes to malls and department stores along with more online buying.

Still, the longtime company said its centers would remain open and "business as usual" as it reworked its massive debt load in bankruptcy court. Court papers said the company has $2.58 billion in total debts.

Lebovitz said earlier that CBL officials had seen a pickup in some leasing categories which have done well in the pandemic such as furniture, food-related companies, wholesale clubs and supermarkets.

"We've had a lot of interest in former anchor locations for those kind of uses, including home-related categories," he said.

Contact Mike Pare at Follow him on Twitter @MikePareTFP.

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