Mall owner CBL & Associates Properties Inc. is alleging in a lawsuit that a bank acting as the agent for some of its lenders forced CBL to file for bankruptcy this week on an accelerated timeline.
"While the company intended to have a deliberate and thoughtful entry into Chapter 11, it was left to scramble for an emergency filing over a weekend due to the entirely unlawful, unnecessary, and unprovoked conduct of the administrative agent," CBL said in the suit.
Chattanooga-based CBL said in the suit that the agent, Wells Fargo Bank, National Association, is trying to exercise control over some of the mall operator's properties, including Northgate Mall in Hixson. Some 22 CBL properties were used as collateral to a credit line the lenders earlier extended to CBL.
CBL said Wells Fargo late last month sent almost 400 letters to over 200 tenants at the properties, directing them to begin paying rent to Wells Fargo rather than to CBL.
"Wells Fargo's unlawful conduct has created chaos and confusion for CBL's tenants and forced CBL to file for bankruptcy on an accelerated timeline and, if not immediately restrained, threatens to jeopardize the success" of the company's Chapter 11 reorganization, the lawsuit said.
U.S. Bankruptcy Court Judge David Jones agreed to issue a temporary restraining order CBL sought against Wells Fargo, and he set a hearing on the matter for later this month.
Benjamin Rosenblum, an attorney representing Wells Fargo, on Thursday said he couldn't comment on the CBL lawsuit.
CBL, one of the biggest mall operators in the country, announced Monday that it had filed for Chapter 11 bankruptcy protection, battered by the coronavirus pandemic and the shift by many shoppers to online retailers.
Still, the longtime company, said its centers will remain open and "business as usual" as it reworks its massive debt load in bankruptcy court. Court papers said the company has $2.58 billion in total debts.
In Chattanooga, the company operates Hamilton Place and Northgate malls along with nearby shopping centers. CBL's portfolio includes 107 properties totaling 66.7 million square feet in 26 states.
In the suit filed in U.S. Bankruptcy Court in Houston, CBL said it entered into a $1.18 billion senior secured credit facility in January 2019 with Wells Fargo serving as the administrative agent for a group of lenders.
As the coronavirus began spreading across the country in March, the suit said, shopping mall owners such as CBL faced an unprecedented and multifaceted threat to their business with tenants filing for bankruptcy protection at a break-neck pace.
Despite the challenges, CBL worked diligently to ensure that it continued to make every payment to Wells Fargo and comply with the terms of its agreement, it said.
As CBL considered its options, including a Chapter 11 restructuring, it in good faith continuously negotiated with its key stakeholders, including Wells Fargo and the bank lenders and their advisers, with the goal of reaching a consensual resolution, according to the suit.
But, the suit said, apparently dissatisfied that CBL first reached agreement on a comprehensive restructuring transaction with a group of unsecured bondholders, Wells Fargo sought negotiation leverage against CBL in August by calling for the immediate repayment of over $1.1 billion in loans under "the guise of merit-less alleged defaults."
Two months later, said the suit, and once again evidently displeased with a recent offer proposed by the bondholders, Wells Fargo "decided to pounce," including a purported takeover of certain of CBL's assets.
"In the face of the worst global pandemic in a century that saw the United States record its steepest drop in economic output on record, Wells Fargo has sought to take advantage of this societal and economic upheaval to the severe detriment of CBL," the suit said. "Relying on baseless allegations of default, Wells Fargo seeks to justify a purported 'acceleration' of over $1.1 billion in loans and the reckless exercise of 'remedies' against CBL."
Contact Mike Pare at mpare@timesfreepress.com. Follow him on Twitter @MikePareTFP.