Washington Prime preferred shareholders object to bid procedures

By Sarah Lizee

Olympia, Wash., July 7 – An informal group of Washington Prime Group Inc. preferred shareholders objected to the company’s proposed bid procedures for its assets, according to a Tuesday filing with the U.S. Bankruptcy Court for the Southern District of Texas.

The group claims the bid procedures provide no meaningful protection or enhancement to the debtors’ businesses or any stakeholder recoveries.

“Instead, they are merely a device to attain the fait accompli contemplated by restructuring support agreement of enabling a small group of four debtholders to wipe out existing equity while, at the same time, siphoning off the residual value of a company that appears likely to have been solvent as of the petition date and is positioned to benefit from a continuing broad economic recovery,” the group said.

The group added that the bidding procedures provide for an inadequate time period to market the debtors’ wide-ranging portfolio of assets, provide unfair advantages to the putative acquirer SVP Global, unnecessarily and unfairly constrain the bidding process to a “very narrow, and likely unachievable,” definition of what is an “acceptable bid,” and as such will not maximize value.

The group said the proposed bidding rules do not allow the estate to obtain maximum value as the bidding procedures have been “sharply crafted” to require only one primary formulation of a bid, at least $2.3 billion in cash. However, the plan sponsor is deemed a “qualified bidder” even though its bid pays no more than $325 million in cash and instead is primarily comprised of reinstating and assuming debt.

“As a result, the ‘go shop’ process and proposed bidding rules are inherently unfair, skewed in favor of one bidder, and fundamentally flawed,” the group said.

“Further, the proposed aggregate $40 million to equity holders in ‘death trap’ plan consideration is highly coercive, and a significant discount to the recent valuation of the company’s equity securities as of the petition date.”

The group noted that on June 14, the market value of the debtors’ equity securities was about $115 million. Preferred equity was about $32 million and the market value of the common equity was about $83 million.

“It is imperative that the debtors do not embark upon a value destructive sale process and capitulate to one bidder at the expense of the estate and public equity holders,” the group said.

Under the proposed bid procedures, competing bids are due by 5 p.m. ET on Aug. 4, an auction, if needed, will be held on Aug. 6, a confirmation hearing will be held on Aug. 12, and the effective date will be Aug. 27.

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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