By Vince Sullivan

Law360 (November 2, 2020, 10:46 AM EST) -- A real estate investment trust that owns shopping malls in the Mid-Atlantic region filed for bankruptcy Sunday in Delaware with a prepackaged plan of reorganization for its $1 billion of debt it hopes to complete before Thanksgiving to address liquidity strains created by the COVID-19 pandemic.

Philadelphia-based Pennsylvania Real Estate Investment Trust — or PREIT — said it has broad lender support for its Chapter 11 plan after dealing with government-mandated travel restrictions and business closures that caused many of the tenants at its 26 retail facilities to forgo rent payments or go out of business themselves.

The company said it needs to wrap up its Chapter 11 case before the holiday shopping season kicks off in earnest at Thanksgiving.

"Amidst all of the uncertainty to the mall-based retail industry posed by the acceleration of COVID-19 cases in recent weeks, it is incumbent on the debtors — for the benefit of all of their stakeholders — that their retail properties are not incrementally impacted any further by the overhang and uncertainty of their restructuring efforts during the upcoming holiday season," Chief Financial Officer Mario C. Ventresca Jr. said in a first-day declaration.

The plan calls for nearly $1 billion of unsecured debt obligations to be converted into secured loans totalling $1.07 billion in secured term and revolving credit facilities with existing lenders, according to the declaration.

The company's prepetition debt comes in the form of a $675 million unsecured credit facility provided by Wells Fargo, US Bank and Citizens Bank that includes a $375 million revolver and a $300 million term loan. It also has a $250 million unsecured term loan agreement with a group of lenders led by Wells Fargo and a $55 million secured bridge loan, also from Wells Fargo, that was made in August.

The secured bridge loan, provided at a time when PREIT was negotiating amendments to its existing loan agreements with lenders, is secured by 12 of the debtor's properties and its own corporate assets and equity, according to the declaration.

In April, the debtor secured a $4.5 million loan under the Paycheck Protection Plan created by Congress as part of a coronavirus relief and aid package. Ventresca said the loan was used to cover payroll, lease and utility obligations in accordance with the rules of the program and expects the full amount to be forgiven before it matures in 2022.

PREIT is a guarantor on the hook for half of a $301 million loan in connection with Fashion District Philadelphia, an urban shopping center located in Center City Philadelphia that opened in September 2019. The property is a joint venture between a non-debtor affiliate of PREIT and Macerich Company. According to the declaration, the filing of the bankruptcy is an event of default under the loan agreement, but negotiations that occurred prepetition amended the loan agreement to avoid the immediate repayment of the debtor's obligations.

In addition to more than 79 million common shares that trade on the New York Stock Exchange, PREIT has also issued 15 million shares of preferred equity in three separate tranches with an outstanding combined liquidation preference of $383.8 million, the declaration said.

The plan calls for a post-bankruptcy capital structure comprising a $150 million first-lien secured revolving credit facility, a $600 million first-lien secured term loan and a $313 million secured term loan. All of the mortgage and loan obligations of the non-debtor property-owning affiliates of PREIT will be reinstated and all general unsecured claims will be paid or reinstated and interest swap obligations totalling $680 million will also be reinstated, according to the declaration.

PREIT secured the support of the overwhelming majority of their lenders when it solicited votes on its Chapter 11 plan last month, with Ventresca saying a single lender with a 5% portion of the total debt holding out. Strategic Value Partners LLC obtained its stake in the debtor just weeks prior to the bankruptcy filings, Ventresca said in his declaration, and after weeks of negotiations, a compromise could not be reached where the lender would sign on to the restructuring support agreement.

Formed in 1960, PREIT has ownership interests in 21 shopping malls and five other retail facilities concentrated in the Mid-Atlantic region of the U.S. comprising more than 20 million square feet of space. The properties are owned through special-purpose entities that are not debtors in the current bankruptcy case, but have mortgage obligations exceeding $800 million, according to the declaration.

The case has been assigned to U.S. Bankruptcy Judge Karen B. Owens, who has scheduled a first-day hearing for 11 a.m. Tuesday.

The debtor is represented by R. Craig Martin, Stuart M. Brown, Aaron S. Applebaum, Richard A. Chesley, Daniel M. Simon, Oksana Koltko Rosaluk, David E. Avraham and Tara Nair of DLA Piper.

The lead case is In re: Pennsylvania Real Estate Investment Trust et al., case number 20-12737, in the U.S. Bankruptcy Court for the District of Delaware.

--Editing by Alyssa Miller.

Update: This story has been updated with more details from the declaration.

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