Mills Corp. extends loan, says it may declare bankruptcy if unable to repay

By Angela McDaniels

Seattle, Dec. 29 - The Mills Corp. and The Mills LP extended their senior term loan to March 31 from Dec. 31 on Thursday and warned that if they are unable to pay off the loan by the new deadline, they could be forced to seek protection under the U.S. Bankruptcy Code and their securityholders "could lose their entire investment," according to an 8-K report filed with the Securities and Exchange Commission on Friday.

The company has $1.0569 billion outstanding under the loan.

As previously announced, Mills is working with advisers Goldman, Sachs & Co. and JP Morgan Securities Inc. to explore strategic alternatives, which may include asset sales, the sale of the company or a recapitalization of the company.

Due to delays in filing its financial reports, Mills said that any transaction requiring a vote of the company's shareholders could be significantly delayed because Mills must provide current financial statements in order to solicit proxies.

The company has yet to file its 10-K report for 2005 and its 10-Q reports for the first three quarters of 2006 and anticipates that it will not file its 10-K report for 2006 or its 10-Q report for the fourth quarter on time.

Mills said it plans to file the 10-K for 2005 by the end of January and the 10-Qs for the first three quarters of 2006 within 45 days of filing the 10-K.

NYSE extension

The company's securities will continue to trade on The New York Stock Exchange through March 1, according to the filing.

In September, the NYSE extended the trading period for the company's listed securities through Jan. 2, subject to ongoing reassessment. Due to the further delay in filing its 10-K report for 2005, Mills said it requested that the NYSE grant an additional three-month trading extension through April 2.

In granting the extension through March 1, the NYSE said it would closely monitor the company's progress toward filing its 10-K report for 2005 and that failure to make progress could result in suspension of the company's listing privileges prior to March 1.

The amended loan includes a new event of default that is triggered by a suspension of the company's listing on the NYSE and requires the company to obtain an extension of its NYSE listing through April 2 by Feb. 27.

Loan details

In connection with the loan extension, the companies must pay $6.6 million of fees, $5.8 million of which was due on Friday and the balance of which will become due when the loan is repaid.

The interest rate on borrowings under the loan will increase by 50 basis points to one-month Libor plus 275 bps on Jan. 1.

In granting the extension, the companies' lenders said that Mills must:

• Comply with a new budget for the period through March 31;

• Refinance its existing debt secured by some of the properties the company acquired from affiliates of Cadillac Fairview by Jan. 15 and refinance its existing debt secured by Broward Mall, Cincinnati Mills, Franklin Mills and Liberty Plaza by Feb. 28;

• File restated financial statements for 2005 with the Securities and Exchange Commission by Jan. 31 and financial statements for 2006 by March 1, which may be extended to March 31 if the holders of Mills LP's trust preferred securities approve an extension of the March 15 deadline for the financial statements; and

• Approve a draft asset sale plan that provides sufficient proceeds to repay the amounts outstanding under the senior term loan by June 30, 2007.

If the above requirements are met, the term loan may be further extended to June 30, 2007 and the interest rate will increase by an additional 50 basis points on April 1.

Goldman Sachs Mortgage Co. is the administrative agent for the deal.

Mills is an Arlington, Va.-based developer, owner and manager of retail destinations.

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