CBL hopes to be out of Chapter 11 in new year

Firm says it’s taking care of malls as it eyes 2021 for reorganization

An attorney in the bankruptcy case of CBL & Associates Properties Inc. said Monday the Chattanooga-based mall operator is taking care of its centers as it moves into the holidays.

“This company has been managing these properties for decades,” said CBL attorney Ray C. Schrock. “We’ve been able to keep operating … and move onto what we hope is a very successful reorganization and be out of Chapter 11 as soon as possible in 2021.”

U. S. Bankruptcy Court Judge David Jones said during a hearing that he “wanted to make sure we’re taking care of visitors first.” CBL operates Hamilton Place and Northgate malls in Chattanooga along with more than 100 other properties in 26 states.

During the hearing in Houston where CBL filed for reorganization of its finances this month in the wake of the coronavirus pandemic, the judge set a Jan. 14 date related to a suit filed by CBL alleging that a bank acting as the agent for some of its lenders forced CBL to file for bankruptcy on an accelerated timeline.

CBL said Wells Fargo Bank National Association sent out letters last month to tenants of some 22 CBL properties used as collateral to a credit line, including Northgate Mall, directing them to pay rent to the bank rather than to the shopping center company.

Schrock said Monday he’s “a little surprised we’re actually arguing about this. We’re taking the rents and segregating them until your honor hears the dispute at the Jan. 14 hearing. We have serious disputes with the banks around actions they took before the bankruptcy.”

While Wells Fargo is arguing for a turnover of the rents, “I believe it’s completely unwarranted,” Schrock said.

But Wells Fargo attorney Benjamin Rosenblum said the rents should be turned over to the secured creditors which the bank represents.

He said the group of lenders is “the sole economic stakeholder. It is our cash.”

The judge said he was hopeful Wells Fargo can agree to the rents being segregated until after the Jan. 14 hearing, and the bank’s attorney said it would do so.

CBL said in the suit that it entered into a $ 1. 18 billion senior secured credit facility in January 2019 with Wells Fargo serving as the administrative agent for a group of lenders.

Despite the challenges of mall shutdowns and retailer bankruptcies, CBL said it worked diligently to ensure it continued to make payments to Wells Fargo and comply with the terms of its agreement.

As CBL considered its options, including a

Chapter 11 restructuring, it in good faith continuously negotiated with its key stakeholders, including Wells Fargo and the bank lenders and their advisers, with the goal of reaching a consensual resolution, according to the suit.

But, the suit said, apparently dissatisfied that CBL first reached agreement on a comprehensive restructuring transaction with a group of unsecured bondholders, Wells Fargo sought negotiation leverage against CBL in August by calling for the immediate repayment of more than $1.1 billion in loans under “the guise of merit- less alleged defaults.”

Two months later, and once again evidently displeased with a recent offer proposed by the bondholders, Wells Fargo “decided to pounce,” including a purported takeover of certain of CBL’s assets, the CBL suit charges.

But Wells Fargo in court papers has denied any wrongdoing, and it denied that CBL has meaningfully engaged with the lenders on a restructuring of CBL’s outstanding indebtedness.

“Wells Fargo denies that it or the other lenders under the first lien credit agreement have engaged in any willful or malicious conduct or improperly interfered with any of the company’s business relationships or contracts,” the company said.