Washington Prime cancels auction; will seek equitization restructuring

By Sarah Lizee

Olympia, Wash., Aug. 5 – Washington Prime Group Inc. canceled an auction for its assets scheduled for Friday, according to a notice filed Thursday with the U.S. Bankruptcy Court for the Southern District of Texas.

The company said it did not receive any qualified bids by the deadline, which was 5 p.m. ET on Wednesday.

Under the bid procedures, since no qualified bids were received, the debtors will proceed to seek confirmation of an equitization restructuring.

A combined hearing to consider approval of the company’s disclosure statement and confirmation of the Chapter 11 plan will be held on Aug. 30.

As previously reported, Washington Prime has received conditional approval of the disclosure statement.

The company entered into a restructuring support agreement with creditors, led by SVPGlobal, that hold about 73% of the company’s secured corporate debt and 67% of its unsecured notes.

Washington Prime had said it would use the Chapter 11 process to implement a comprehensive and consensual financial restructuring of its corporate-level debt that will allow it to substantially deleverage its balance sheet and strengthen its business and operations going forward, either through a full equitization of the company’s unsecured notes or an alternative value-maximizing transaction that would repay, in full in cash, all of the company’s corporate-level debt.

The agreement provides for a deleveraging of the company’s balance sheet by nearly $950 million 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, as plan sponsor, the proceeds of which will 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, payment in full of all claims held by vendors and service providers, and a baseline recovery for the company’s existing common and preferred equity holders of $40 million in cash or 6.125% of new equity, subject to dilution.

Additionally, the agreement allowed the company to market its assets to determine whether any alternative transaction or transactions that would pay existing corporate debt in full in cash and deliver greater recoveries to existing common and preferred equity holders were attainable.

According to the disclosure statement, the plan treatment for claims in an equitization restructuring will be as follows:

• Holders of revolving and term loan claims will 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 will 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 accrued and unpaid amounts;

• Holders of unsecured notes claims will 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 will also 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 will receive reinstatement or other treatment rendering their claims unimpaired;

• Holders of general unsecured claims will receive payment in full in cash, reinstatement or other treatment that leaves their claims unimpaired;

• Holders of existing preferred equity interests will receive, if this class votes in favor of the plan, their pro rata share of the preferred equity cash pool of $40 million (or $20 million if holders of existing common equity interests also vote to accept the plan), or, if a holder elects the preferred equity option, their pro rata share of the preferred equity pool in lieu of the distribution under the preferred equity cash pool. If this class votes to reject the plan, holders will receive no distribution; and

• Holders of existing common equity interests will receive, if both classes of existing preferred equity interests and existing common equity interests vote in favor of the plan, they’ll receive their pro rata share of the common equity cash pool of $20 million, or, if they elect the common equity option, they will receive their pro rata share of the common equity pool in lieu of the distribution under the common equity cash pool. If both classes vote to reject the plan, holders will receive 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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