Mall owner Washington Prime files for Chapter 11 bankruptcy

Eliza Ronalds-Hannon and Jeremy Hill

Washington Prime Group Inc., a real estate investment trust that operates enclosed malls and strip centers across the U.S. — including Arbor Hills in Ann Arbor — filed for bankruptcy after the COVID-19 pandemic drove away shoppers.

The Chapter 11 filing in Houston lets Washington Prime stay in business while it restructures its debts in a deal that it reached with certain creditors, according to the bankruptcy. The company, with assets estimated at $4 billion and debt of almost $3.5 billion, secured a bankruptcy loan of as much as $100 million to fund operations during court proceedings.

Shake Shack, shown here in Detroit's Campus Martius, is one of the retailers operating in Ann Arbor's Arbor Hills. The shopping center's owner, Washington Prime Group, just filed for bankruptcy.

Arbor Hills, on the east side of town off Washtenaw, opened in 2013, according to the company's website. It encompasses nearly 87,000 square feet across four buildings, consisting of retail and restaurant space including such upscale names as Arhaus, lululemon, Shake Shack and Sur la Table.

After extensive negotiations with creditors including the investment firm SVPGlobal, the company agreed to pursue a plan to reduce debt by swapping equity for some of its debt claims while simultaneously soliciting the market for better offers, according to court filings which cited the “dual path” plan.

Rent collections dried up and tenants filed for bankruptcy or went out of business as the pandemic spread around the nation in 2020. The Columbus, Ohio-based company, which has about 100 locations, began negotiating with its creditors last year and skipped a $23 million bond interest payment in February. Creditors had been extending a forbearance agreement amid the debt talks.

Still, Washington Prime’s share price surged in recent weeks as it was whipped into the frenzy of trading around meme stocks popular among retail investors and on Reddit message boards. The stock rose as high as $6.98 in June, from a price closer to $2 earlier this year. Trading was halted on Monday as investors digested news of the bankruptcy.

Washington Prime aims to deleverage its balance sheet by nearly $950 million, according to a company statement. The plan includes swapping unsecured notes for equity, a $190 million paydown of its revolving credit and term loan facilities and a $325 million equity rights offering.

The plan has support from creditors that hold about 73% of the principal outstanding of secured corporate debt and 67% of the unsecured notes. Bloomberg News previously reported that Washington Prime was weighing a bankruptcy filing as talks faltered.

The case is Washington Prime Group Inc., 21-31948, U.S. Bankruptcy Court for the Southern District of Texas (Houston).