Mall owner Washington Prime Group is preparing a potential bankruptcy filing as time runs out to avert a default after it skipped an interest payment on its debt, according to people with knowledge of the plans, Bloomberg News reported. The real estate investment trust, which owns about 100 malls throughout the U.S., said last month that it would use a 30-day grace period to continue negotiations with its lenders. The plan to file for chapter 11 protection isn’t final and could change if negotiations evolve or the company’s grace period is extended, the people added. Short interest in the stock grew in late 2020, exceeding 30% of the outstanding shares as recently as October, according to Bloomberg data. The shares continued to trade as high as $7.49 even after the skipped debt payment. Day traders and Reddit investors began flocking to certain heavily shorted names in hopes of profiting when short sellers covered their bets. Columbus, Ohio-based Washington Prime has said that the impact from the COVID-19 pandemic could affect its ability to comply with debt covenants and continue operations, or remain a going concern “under certain circumstances.” It said in November that it was “actively negotiating” with debt holders to cut borrowings. At that time, Chief Executive Officer Lou Conforti emphasized that bankruptcy was not on the table. Washington Prime has been working with advisers from law firm Kirkland & Ellis and investment bank Guggenheim to help it handle its maturities, which include a first-lien term loan due in June. In December, it attempted to convert about $260 million worth of its unsecured bonds into $175 million of preferred equity issued by a new special purpose entity, but failed to reach an agreement with debt holders.
