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Washington Prime Loses $55.4M In 1st Quarter

Washington Prime Group has received its sixth forbearance extension with creditors — but the mall company’s losses continue to mount as negotiations with creditors crawl along.

In February, Washington Prime, which owns the Chautauqua Mall in Lakewood, missed a $23 million interest payment that began a 30-day grace period for the company to negotiate its debt with lenders. That negotiating period has been extended six times as the company works with lenders and other creditors to restructure Washington Prime’s debts.

According to Bloomberg News, one of the issues complicating the negotiations is the value of and claims on Washington Prime’s real estate that isn’t already pledged as collateral on outstanding debt.

“There can be no assurances that the company will be able to continue to amend the forbearance agreements or extend the forbearance periods or that its lenders or noteholders will not accelerate the company’s indebtedness outstanding under the senior notes or its credit facilities after the expiration of the forbearance periods,” Washington Prime officials said in a news release announcing first quarter financial statements. “In connection with these negotiations, the Company incurred approximately $14.5 million of legal and professional costs through March 31, 2021, which have been recorded to general and administrative expense in the accompanying consolidated statements of operations and comprehensive loss for the period then ended.”

Washington Prime officials first said in March that a bankruptcy proceeding may be necessary to protect the company from creditors. While the company is still saying a bankruptcy proceeding is possible, Washington Prime officials said in the earnings statement that mall properties should continue to operate if it enters bankruptcy. Washington Prime officials also were clear to state the importance of restructuring to the company’s future.

Washington Prime had net income of $3.4 million in the first quarter of 2020, before COVID-19 restrictions forced many properties to close. Twelve months later, the company recorded a $55.4 million net loss in the first quarter of 2021 driven primarily tenant lease modifications and increased bad debt expenses caused by the pandemic. Of the $55.4 million loss, $20.7 came from lower revenues while $14.5 million are related to negotiations and discussions to restructure its debts. Washington Prime also had a $12.1 million noncash charge to interest expense that it didn’t have in 2020. Lastly, the company didn’t make as much money on the sale of outparcels in the first quarter of 2021 as it did in 2020.

Funds from operations for the first quarter of 2021 was a loss of $3.7 million, down from $49.7 million in the first quarter of 2020.

“The company’s intentions are to consummate the restructuring and to generate sufficient liquidity from the restructuring to meet its obligations and operating needs,” the earnings statement states. “There can be no assurance that the restructuring will occur or be successful. Additionally, the company continues to focus on its initiatives to drive operational performance and work with its partners to drive revenue as the company operates its business. If the restructuring is unsuccessful, the company’s cash position may not be sufficient to support daily operations or initiatives.”

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