COVID-19 imperils Fayette Mall owner. Debt payment missed, deadline looms.
CBL & Associates Properties, which owns the Fayette Mall in Lexington, is confronting significant coronavirus-exacerbated financial trouble that endangers its future, according to Securities and Exchange Commission filings.
The company, which owns more than 60 properties nationwide, did not make an $11.8 million interest payment on unsecured bonds due June 1. The 30-day grace period passed, according to the SEC filing. CBL entered into forbearance agreements with over half of the creditors on those bonds, and the agreements are set to expire on July 15, according to the SEC filing.
The company said in a previous filing that its outlook is bleak.
“We have determined that there is substantial doubt about our ability to continue as a going concern,” Farzana Khaleel, the company’s executive vice president, said in the filing.
The company attributed much of the uncertain outlook to the continuing COVID-19 pandemic. Some stores haven’t been able to pay rent. Some tenants have closed or terminated leases early.
“The rapid development and fluidity of this situation preclude any prediction as to the full adverse impact of the COVID-19 pandemic,” the filing said. “The COVID-19 pandemic presents material uncertainty and risk with respect to our financial condition, results of operations, cash flows and performance.”
Almost every commercial property in CBL’s portfolio closed at some point during the pandemic, according to the filing. The Fayette Mall reopened on May 20. The mall has 150 stores, according to CBL’s website, but some are still closed, according to the mall’s directory.
As commercial tenants in its properties struggled, CBL collected only 27 percent of the rent in April, according to the filing. The company estimated it would collect between 25 and 30 percent of its due rent in May.
The filing also said CBL was negotiating to collect past due rent payments later in 2020 and 2021. But Matthew DiLallo of the Motley Fool said the company may not survive long enough for those late payments to make a difference.
“If the company can’t reach acceptable terms with its lenders, it might need to file for bankruptcy to restructure its debt,” DiLallo said. He ultimately concluded that CBL doesn’t seem likely to survive.
The June 30 SEC filing declaring a forbearance agreement said the company was negotiating the debt, but that didn’t guarantee the financial issues would be resolved.
“There can be no assurance ... that the company will be able to negotiate acceptable terms or to reach any agreement with respect to its indebtedness,” the filing said.
CBL’s net income was $108.8 million last year, just two years after it operated at a $120.9 million profit in 2017, according to Reuters.
CBL has “engaged advisors to assist” exploring options to help keep the company afloat, according to the filing. The company said it eliminated all nonessential expenditures, implemented a furlough and salary reduction program, suspended capital expenditures, and drew $280 million on a secured line of credit to improve liquidity and reduce costs.
In addition to the Fayette Mall, CBL also owns The Plaza at Fayette, the Jefferson Mall in Louisville and The Outlet Shoppes of the Bluegrass in Simpsonville.
It’s not evident what effects the financial turmoil will have on the properties. CBL could not be reached for additional comment.
This story was originally published July 6, 2020 at 2:43 PM.