Mall owner CBL & Associates Properties Inc., which filed for bankruptcy protection last year, has agreed to try to mediate a dispute with a bank involving $1.1 billion in loans to the company.
Chattanooga-based CBL on Thursday was to have held a pre-mediation conference with Wells Fargo Bank, National Association, and will later hold more talks and potentially avoid a trial that was slated to begin next week.
Since the order was filed early this week, CBL shares traded over the counter the past two days have risen more than 23%. On Thursday, CBL stock closed at 0.0567 cents per share.
CBL, one of the nation's biggest mall owners, has alleged Wells Fargo, acting as the agent for some of its lenders, forced the company to file for bankruptcy on an accelerated timeline last November and that the bank improperly contended that CBL defaulted on its debt.
CBL has said in court papers that Wells Fargo tried to exercise control over some of the operator's properties, including Northgate Mall in Hixson. Some 22 CBL properties were used as collateral to a credit line the lenders extended to CBL in early 2019.
CBL said Wells Fargo late last year 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 threatens to jeopardize the success" of the company's Chapter 11 reorganization, the complaint said.
But Wells Fargo in court papers has denied any wrongdoing. CBL has said it's taking the rents and segregating them until the dispute is heard by the court.
U.S. Bankruptcy Court Judge David R. Jones said this week in an order that CBL, Wells Fargo, and other parties "agree that mediation may be an efficient and effective mechanism to consensually resolve all issues relating to these Chapter 11 cases."
The judge said that another Bankruptcy Court judge for the Southern District of Texas, Marvin Isgur, will serve as mediator. The order said that the non-binding mediation shall terminate when determined by Judge Isgur or on Jan. 21, unless the parties agree to an extension.
"Judge Isgur has absolute discretion as to the timing and means and methods of any mediation," the order said.
CBL filed for bankruptcy protection after the company was battered by the coronavirus pandemic along with the shift by many shoppers to online retailers.
Still, the longtime company said its centers would 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.
CBL has said it hopes to exit Chapter 11 as soon as possible in 2021.
CBL Chief Executive Officer Stephen Lebovitz said last month that the company sees more leasing to unique users this year.
Lebovitz said CBL has seen a pickup in some sectors which have done well in the pandemic such as furniture, food-related companies, wholesale clubs and supermarkets.
"We've had a lot interest in former anchor locations for those kind of uses, including home-related categories," he said.
Contact Mike Pare at mpare@timesfreepress.com. Follow him on Twitter @MikePareTFP.