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Shopping mall owners CBL & Associates Properties Inc. and Pennsylvania Real Estate Investment Trust are facing determined opponents to the companies’ respective bankruptcy restructuring plans, WSJ Pro Bankruptcy reported. CBL, one of the largest mall owners in the country, filed for bankruptcy on Sunday hoping to convert bondholders to owners but has a fight on its hands with its bank lender, Wells Fargo Bank NA, which isn’t on board, CBL lawyer Ray Schrock said at a court hearing on Monday. Likewise, PREIT—which also filed for bankruptcy Sunday—reached agreement on a restructuring with nearly all major creditors, save for one opponent that said the company’s proposal does virtually nothing to improve the balance sheet and is destined to end in another bankruptcy. “This company filed for bankruptcy with a deal with its bondholders and a fight with its bank lenders,” said Michael Stamer, a lawyer for the CBL bondholders that agreed to convert some debt to equity, during Monday’s court hearing. After CBL’s bondholders sent a restructuring proposal to Wells Fargo, the bank declared a default against the company and proceeded to step in to collect rent itself at some of the company’s properties, according to CBL’s court filings.

The Mortgage Bankers Association said that the U.S. forbearance rate measuring the share of mortgages with suspended payments fell seven basis points to 5.83 percent last week, HousingWire.com reported. “With more borrowers exiting forbearance in the prior week, the share of loans in forbearance declined across all loan types. Almost half of forbearance exits to date have been from borrowers who remained current while in forbearance, or who were reinstated by paying back past-due amounts,” said Mike Fratantoni, MBA’s senior vice president and chief economist. The share of Fannie Mae and Freddie Mac loans in forbearance fell 6 basis points last week to 3.66 percent – marking the 21st week in a row the GSEs’ forbearance rate has dropped. Though the rate for Ginnie Mae loans, which include loans backed by the Federal Housing Administration, rose slightly the week prior, last week’s rate leveled off after falling 4 basis points to 8.13 percent. Last week’s drop was largely driven by the forbearance share of portfolio loans and private label securities (PLS) and independent mortgage bank (IMB) servicers both falling 8 basis points to 8.82 percent and 6.27 percent, respectively. 

Mall owner CBL & Associates Properties Inc. filed for court protection from creditors, following some of its biggest tenants into bankruptcy after the pandemic kept consumers at home, forcing many retailers already weakened by e-commerce to quit paying rent, Bloomberg News reported. The filing in the Southern District Court of Texas will give the company a chance to keep operating while reorganizing its finances and business. It listed estimated assets at about $1 billion to $10 billion, and estimated liabilities at around the same amount. Some of CBL’s biggest renters, including J.C. Penney Co. and Ascena Retail Group Inc. have already filed for bankruptcy with plans to close stores. Analysts have long predicted a shakeout in malls and strip shopping centers serving less affluent areas, which dominate CBL’s roster. CBL previously warned investors it was in trouble because tenants weren’t paying their rent. As of mid-August, the Chattanooga, Tennessee-based company managed 108 properties in 26 states. Read more.

Occupancy issues are at the heart of many significant retail cases, as detailed in the ABI publication Retail and Office Bankruptcy: Landlord/Tenant Rights, available at the ABI Store. 

PREIT, the troubled owner of malls throughout the region including Center City’s Fashion District Philadelphia, filed a pre-packaged Chapter 11 bankruptcy yesterday aimed at unlocking $150 million in new borrowing, the Philadelphia Inquirer reported. PREIT, whose initials stand for Pennsylvania Real Estate Investment Trust, said in a news release that it will continue operations without interruption while it obtains necessary approvals for the plan. The Chapter 11 petition comes about two weeks after the company first outlined the restructuring plan, saying it aimed to avoid a bankruptcy filing by persuading all of its lenders to back the proposal. It ultimately received support from 95 percent of its creditors, it said in the release. “With the overwhelming support of our lenders, we look forward to quickly emerging from this process as a financially stronger company with the resources and support to continue creating diverse, multiuse ecosystems throughout our portfolio,” PREIT chief executive Joseph F. Coradino said. Under the deal, PREIT would put up properties that it owns free and clear as collateral for its $919 million in existing unsecured debt and the $150 million in new borrowing. That would mean PREIT’s lenders could foreclose on those properties if it defaulted. PREIT is the biggest mall owner in Philadelphia and its surrounding counties, with 4.7 million square feet of space under management in the region, according to market tracker CoStar Group.

Schulte Roth & Zabel has filed suit against its New York landlord, seeking at least $10 million, becoming the latest firm to dispute its office rent obligations during the pandemic, the American Lawyer reported. Schulte is seeking rent abatement from its landlord at 919 Third Ave., an SL Green property in Midtown. The case is similar to Simpson Thacher & Bartlett and Jenner & Block’s litigation this year against their landlords. The law firm disputes have continued to percolate in the legal industry, as the pandemic and shutdown orders have forced firms to operate remotely. But the landlord’s attorney at Fried, Frank, Harris, Shriver & Jacobson strongly disputes Schulte’s argument — along with the broader argument made by other firms. “While this lawsuit is legally without merit, the attempt by Schulte Roth & Zabel and other well-heeled, white-shoe firms to take advantage of the pandemic and not live up to their financial commitments at a time when the vast majority of New Yorkers continue to meet their obligations poses a very serious threat to New York City and its economy,” said Janice Mac Avoy, a Fried Frank partner. Schulte, represented by Foley & Lardner, is suing Metropolitan 919 3rd Avenue LLC, as the successor to 919 Third Ave. Associates in Manhattan Supreme Court. Schulte said it has had an office at 919 Third Ave. since 2000. Schulte’s suit cites sections of the lease that point to “unavoidable delays” in occupying the space. Schulte argues the “lease is clear” that where the firm has been forced to vacate its offices “by laws or government mandates” in response to a national emergency for more than 15 business days, the firm is entitled to rent abatement while Schulte cannot occupy its offices “for the ordinary conduct of its business.”

When his skyscraper in Chicago proved a disappointment, Donald Trump defaulted on his loans, sued his bank, got much of the debt forgiven — and largely avoided paying taxes on it, the New York Times reported. The financial crisis was in full swing when Trump traveled to Chicago in late September 2008 to mark the near-completion of his 92-floor skyscraper. He and his family hoped the Trump International Hotel & Tower would cement their company’s reputation as one of the world’s marquee developers of luxury real estate. Instead, the skyscraper became another disappointment in a portfolio filled with them. Construction lagged. Condos proved hard to sell. Retail space sat vacant. The president’s federal income tax records show for the first time that, since 2010, his lenders have forgiven about $287 million in debt that he failed to repay. The vast majority was related to the Chicago project. When the project encountered problems, he tried to walk away from his huge debts. For most individuals or businesses, that would have been a recipe for ruin. But tax-return data, other records and interviews show that rather than warring with a notoriously litigious and headline-seeking client, lenders cut Trump slack — exactly what he seemed to have been counting on. Big banks and hedge funds gave him years of extra time to repay his debts. Even after Mr. Trump sued his largest lender, accusing it of preying on him, the bank agreed to lend him another $99 million — more than twice as much as was previously known — so that he could pay back what he still owed the bank on the defaulted Chicago loan, records show.

Pennsylvania Real Estate Investment Trust (PREIT) has been notified by Wells Fargo and other lenders that claim that the mall landlord is in default of a loan agreement, the Philadelphia Business Journal reported. Wells Fargo and other financial institutions also stated that PREIT has breached a restructuring support agreement (RSA) by not filing for chapter 11 bankruptcy on or before Oct. 18, according to a Securities and Exchange Commission filing made by PREIT. PREIT has responded to Wells Fargo, saying in SEC documents that it disputes the lenders’ characterization of the situation and that it didn't breach an agreement and that no event of default under any of the credit agreements has taken place. "The company is engaged in good-faith discussions with its lenders" and is working to push out any date that it would potentially file for chapter 11, PREIT said in the SEC filing. The lenders indicated that, as a result of the default, interest on the outstanding principal balance of the loans began accruing at the increased post-default rate on Oct. 19. The situation comes after PREIT on Oct. 14 said that it had reached a tentative financing plan with a majority of its lenders, warning that it is prepared to file chapter 11 protection if it is unable to reach further agreements on restructuring the company's debt. The Philadelphia mall owner, which has been struggling for some time, said that 80 percent of its lenders had agreed to an arrangement that would provide it with a $150 million loan and other provisions concerning its debt maturities. However, PREIT said that it needs the remainder of its lenders to agree to the arrangement otherwise it may need to seek bankruptcy protection and restructure the company and its debt through a prepackaged reorganization in bankruptcy court.