Mall owner files for bankruptcy for second time in three years

The owner of several area malls in Chester, Delaware and Montgomery counties has filed for Chapter 11 bankruptcy protection. It is the second bankruptcy filing for the company since 2020.

Pennsylvania Real Estate Investment Trust — commonly referred to as PREIT — said in a Monday filing that it is taking steps to execute a “comprehensive reorganization” to strengthen its balance sheet and reduce its debt by about $880 million. The company outlined a reorganization plan it said is supported by all its lenders.

PREIT owns and manages six Pennsylvania mall properties, including: Plymouth Meeting Mall in Plymouth Township, Montgomery County; Willow Grove Park Mall in Abington Township, Montgomery County; Exton Square Mall in West Whiteland, Chester County; and Springfield Mall in Springfield, Delaware County.

The bankruptcy filing will ensure PREIT can continue its business operations without interruption while it obtains approvals for its restructuring plan, according to the filing — made in U.S. Bankruptcy Court for the District of Delaware.

In its filing, PREIT said it expects it will be able to emerge from bankruptcy by early February. When it does, all existing preferred and common shares of PREIT will be canceled, and PREIT will no longer be a publicly traded company.

Shareholders will receive $10 million under the terms of the plan.

“Following the pandemic disruption, PREIT has worked tirelessly to enhance the portfolio, dramatically improve occupancy and diversify its tenancy. However, unusual economic conditions have limited the Company’s options with respect to its debt obligations as meaningful achievements on the operating front were met with inflation and rising interest rates,” Joseph F. Coradino, chairman and CEO of PREIT, said in a statement.

He added that the restructuring will position PREIT “to execute on strategic initiatives to continue transforming its portfolio for the tenants and communities it serves.”

To facilitate the process, the company has received commitments for new financing of about $135 million from a diverse group of leading investors led by Redwood Capital Management LLC and Nut Tree Capital Management LP.

In November 2021, the company hired PJT Partners to lead a process to engage all strategic options to maximize shareholder value, according to Michael DeMarco, lead independent trustee for PREIT’s board. PJT Partners marketed PREIT’s properties, sought capital infusion and explored available options.

“That process did not result in any options that would allow the company to refinance or otherwise achieve value that would exceed the aggregate amount of its first and second lien loans,” DeMarco said in a statement.

PREIT previously filed for bankruptcy in November 2020, emerging from bankruptcy one month later — on Dec. 11, 2020. The company said at the time that the filing was the next step in executing its financial restructuring plan.

Headquartered in Philadelphia, PREIT owns and manages retail shopping malls in eight states in the Eastern U.S. with concentration in the Mid-Atlantic and greater Philadelphia region.

For more information about the case, visit https://cases.ra.kroll.com/PREIT2023/.