Cool Springs Galleria Owner Prepares to File Chapter 11 Bankruptcy
Chattanooga-based CBL may find it necessary to restructure its own debts as a result of reorganizations filed by major retail tenants
Mall owner CBL & Associates (NYSE: CBL), which boasts Cool Springs Galleria and Cool Springs Crossing among its 108 properties, is in advanced negotiations with lenders and may seek Chapter 11 protection to restructure its debt. The company's predicament is a direct result of financially troubled tenants such as L Brands (Victoria’s Secret and PINK- one of CBL’s largest tenants) JCPenny, J.Crew, and Ann Taylor all filing for bankruptcy protection as a result of the COVID-19 shutdown. In this article, we look at the challenges CBL is facing, discuss what a restructuring will probably look like, and consider the impact on Cool Springs Galleria.
CBL operates mostly “Class B malls,” and is experiencing financial distress due to the unrelenting wave of retail-sector failures. As it prepares for an almost certain Chapter 11 bankruptcy filing, shares in the company have plummeted. CBL claims the major factor in its loss of income came from stores withholding rent during the economic shutdown. CBL has more than $3 billion in debt, is operating under a short-term forbearance agreement, and recently skipped an interest payment due. The company posted a first quarter net loss of $133.9 million, compared to a net loss of $50.2 million a year ago.
Should CBL file, it would likely seek to restructure some of that debt and deleverage. A Chapter 11 filing would provide the breathing room CBL desperately needs to allow time for its tenants to re-open and resume rental payments, and seek to sell off under-performing locations.
One of CBL’s largest obstacles may be the loss in popularity of enclosed shopping spaces and CBL’s tenants downsizing as well. For example, Victoria’s Secret, Bed Bath and Beyond, and Kay Jewelers, some of CBL’s most profitable tenants, have all announced plans to close large numbers of stores. Even worse, many of CBL’s major tenants will close permanently.
Sale of CBL’s assets is another potential outcome for a Chapter 11 filing. If the company were to liquidate in chapter 7, most analysts believe that stockholders would not receive any distribution.
Cool Springs Galleria is one of the nation’s 1,793 enclosed shopping malls. Some analysts predict that as many as 500 are at risk of disappearing completely. Will Cool Springs be among them? The answer is unknown, but Cool Springs Mall is home to some of the most financially troubled tenants including, Ann Taylor, Bath & Body Works, California Pizza Kitchen, JCPenny, GNC Live Well, Victoria’s Secret, Centric Brands (which licenses well-known labels such as Kate Spade and Calvin Klein), and Pier1 Imports.
EmergeLaw, PLC is a Nashville-based law firm focused on out-of-court workouts and Chapter 11 bankruptcy. Our experienced attorneys help companies and their owners make sound decisions and maximize value in the face of financial distress.