PREIT Files For Bankruptcy Again, Will Go Private As $1.1B Debt Matures

Pennsylvania Real Estate Investment Trust over the weekend filed for Chapter 11 bankruptcy for the second time in three years. 

PREIT hopes the move will allow it to shed some $880M in debt and emerge from the reorganization as a private company, according to a filing with the Securities and Exchange Commission. It also seeks to extend the maturity date for its remaining obligations.

About $1.1B in PREIT-held debt matured Sunday, and all of the company's lenders approved the restructuring.

PREIT emerged from its last bankruptcy, initiated in late 2020, with renewed access to financing.

As part of the new reorganization, existing preferred and common shares of PREIT will be canceled, and the company will no longer be publicly traded after it emerges from bankruptcy. A total payment of $10M will be made to existing shareholders.

The company's new board is authorized to issue options or other equity stakes to the management and directors of the reorganized PREIT, according to the filing, and likely to other investors as well, though the exact allocation is yet to be determined.

As part of the filing, PREIT has also agreed to relinquish its 50% stake in the 1M SF Fashion District mall in Philadelphia to Macerich, which it had previously co-owned with that company.

A group of investors led by Redwood Capital Management and Nut Tree Capital Management are providing $135M of debtor-in-possession and exit financing for PREIT.

“The filing will ensure that PREIT can continue all business operations without interruption while it obtains necessary approvals of its financial restructuring,” PREIT said in statement Monday morning.

PREIT didn't respond to a request for comment from Bisnow.

Under the terms of the plan, which has to be approved by the U.S. Bankruptcy Court for the District of Delaware, first-lien lenders have the option to receive either a cash payment equal to 100% of their claims or convert them into loans equal to 101% of their claims.

Second-lien lenders will get their pro rata share of 65% of the new equity interests in the reorganized PREIT. Those who backstop the exit facility will receive 35% of the new equity interests, according to the filing.

PREIT, which specializes in shopping malls, posted a third-quarter net loss of about $63.9M. Same-store net operating income decreased 5.3% in Q3 from the same period in 2022, and core mall total occupancy decreased by 70 basis points to 93.6% year-over-year.