Washington Prime emerges from bankruptcy with $1 billion debt cut

By Sarah Lizee

Olympia, Wash., Oct. 21 – Washington Prime Group Inc. has emerged from the Chapter 11 process and completed its financial restructuring, according to a Thursday press release.

The plan, which was led by sponsor SVPGlobal and received support from creditors and equity holders, was confirmed by the U.S. Bankruptcy Court for the Southern District of Texas on Sept. 3, as previously reported.

The company said it has emerged from bankruptcy as a stronger and more stable company with its debt reduced by nearly $1 billion and its overall liquidity greatly improved.

Operating as a private holding company, majority owned by SVPGlobal, Washington Prime said it will be well positioned to capitalize on opportunities to improve its portfolio and to strengthen its relationships with guests, tenants, lenders, partners and other constituents.

Lou Conforti is stepping down from his role as chief executive officer. Mark Yale, the company’s executive vice president and chief financial officer, and Josh Lindimore, the company’s executive vice president, head of leasing, will serve as interim co-CEOs.

In addition, Sujan Patel, Jeff Johnson and Martin Reid have been named new members of the company’s board of directors.

During the Chapter 11 process, Kirkland & Ellis LLP served as legal counsel to the company, and Alvarez & Marsal North America, LLC served as restructuring adviser. Guggenheim Securities, LLC served as the company’s investment banker. Davis Polk & Wardwell LLP served as legal counsel and Evercore Group LLC served as investment banker and financial adviser to SVPGlobal. Wachtell, Lipton, Rosen & Katz served as legal counsel and PJT Partners LP served as investment banker for an ad hoc group of consenting creditors.

Plan terms

As previously reported, the plan includes a settlement with the official committee of equity security holders, which will ensure a successful reorganization of the debtors, and provides holders of existing equity interest with materially increased recoveries and certainty regarding their treatment.

The plan was amended so that the total amount of cash to be allocated to holders of existing equity interests for purposes of the equity cash pools was increased to $55 million from $40 million, of which $35 million was to be allocated to the preferred equity cash pool and $20 million was to be allocated to the common equity cash pool.

The total amount of new common equity to be allocated to holders of existing equity interests for purposes of the equity pools was increased to 9.125% from 6.125%, of which 6.0625% was to be allocated to the preferred equity pool and 3.0625% to the common equity pool.

Holders of existing common equity interests had the option to elect to receive new common equity in lieu of cash under the plan, in which case those holders would also have the right to participate in their pro rata share of $7.96 million of the $130 million allocated to the backstop parties in a $260 million equity rights offering if electing to receive a distribution from the common equity pool.

As a result of the settlement, holders of unsecured notes may receive slightly less new common equity under the plan as compared to what they were entitled to receive under the initial plan.

The plan contemplates a deleveraging of the company’s balance sheet through the equitization of unsecured notes and a $190 million paydown of the company’s revolving credit and term loan facilities.

It also contemplates a $325 million equity rights offering, fully backstopped by SVPGlobal, the proceeds of which was to be applied to, among other things, the paydown of secured debt.

The agreement also provides for an effective four-year extension of the remaining credit facility debt, and payment in full of all claims held by vendors and service providers. A new revolving exit facility in the amount of up to $50 million, less the initial outstanding amount of any incremental term loans, is being issued. The new term loan exit facility is equal to $1.21 billion plus the elective exit loan amount.

Holders of revolving and term loan claims were to receive their pro rata share of $1.19 million plus the elective exit loan amount attributable to the revolving and term loan facilities claims, if any, in principal amount of loans under the new term loan exit facility, and the revolving and term loan facilities cash pool, which is $150 million plus cash in the amount of certain additional accrued amounts.

Holders of Weberstown term loan facility claims were to receive their pro rata share of $25 million, plus the elective exit loan amount attributable to the Weberstown term loan facility claims, if any, in principal amount of loans under the new term loan exit facility, and the Weberstown cash pool, which is $40 million plus cash in the amount of certain additional unpaid amounts.

Holders of unsecured notes claims were to receive their pro rata share of 100% of new common equity, less any new common equity distributed to holders of existing equity interests under the equity options and subject to dilution on account of the management incentive plan, backstop equity premium, and the equity rights offering. They were also to receive their pro rata share of the unsecured noteholder rights, which is the right to purchase their pro rata share of 50% of the new common equity offered in the equity rights offering.

Holders of priority-level mortgage guarantee claims were to receive reinstatement or other treatment rendering their claims unimpaired.

Holders of general unsecured claims were to receive payment in full in cash, reinstatement or other treatment that leaves their claims unimpaired.

Intercompany claims and intercompany interests were to be reinstated, or discharged, canceled, released and extinguished with no distribution.

Section 510(b) claims were to be canceled with no distribution.

The real estate investment trust is based in Columbus, Ohio. The company filed bankruptcy on June 13 under Chapter 11 case number 21-31948.

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