Cbl & Associates Properties Inc 8-K, filed Aug 25, 2020
Cbl & Associates Properties Inc (CBL)
About this 8-K
Cbl & Associates Properties Inc filed this 8-K on August 25, 2020, reporting on events of August 19, 2020.
Items reported
- Item 2.04: Debt obligation accelerated or increased
- Item 7.01: Regulation FD disclosure
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported):
(Exact Name of Registrant as Specified in its Charter)
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(State or Other Jurisdiction of Incorporation or Organization) |
|
(Commission File Number) |
|
(I.R.S. Employer Identification No.) |
(Address of principal executive office, including zip code)
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
|
|
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|
|
|
|
|
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
|
|
|
|
|
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
|
|
|
|
|
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered under Section 12(b) of the Act:
|
|
||||
|
|
|
|
|
|
|
Title of each Class |
|
Trading Symbol(s) |
|
Name of each exchange on which registered |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
ITEM 2.04 Triggering Events That Accelerate or Increase a Direct Financial Obligation or an Obligation Under an Off-Balance Sheet Arrangement
As previously disclosed, CBL & Associates Limited Partnership (the “Operating Partnership”), the majority owned subsidiary of CBL & Associates Properties, Inc. (the “REIT” and collectively with the Operating Partnership, the “Company”), received notices of default and reservation of rights letters from Wells Fargo Bank, National Association, the administrative agent (the “Administrative Agent”) under the Operating Partnership’s Credit Agreement, dated as of January 30, 2019 (as the same may be amended, restated, supplemented, replaced or otherwise modified from time to time, the “Credit Agreement”) on each of May 26, 2020, June 2, 2020, June 16, 2020 and August 6, 2020. The notices asserted that certain defaults and events of default occurred and continue to exist by reason of the Operating Partnership’s failure to comply with certain restrictive covenants, including the liquidity covenant, in the Credit Agreement and resulting from the failure to make the $11.8 million interest payment that was due and payable on June 1, 2020 to holders of the Operating Partnership’s $450 million outstanding principal amount of 5.25% senior unsecured notes due 2023 (the “2023 Notes”) and the $18.6 million interest payment that was due and payable on June 15, 2020 to holders of the Operating Partnership’s $625 million outstanding principal amount of 5.95% senior unsecured notes due 2026 (the “2026 Notes”) prior to the expiration of the applicable grace periods. In addition, as previously disclosed, on August 6, 2020, the Operating Partnership received a notice of imposition of base rate and post-default rate letter from the Administrative Agent, which (i) informed the Operating Partnership that following an asserted event of default on March 19, 2020, all outstanding loans were converted to base rate loans at the expiration of the applicable interest periods and (ii) sought payment of approximately $4.8 million related thereto for April through June 2020 (the “Demand Interest”).
On August 19, 2020, the Operating Partnership received a notice of default and reservation of rights letter from the Administrative Agent, which asserted that each of the failure to pay the Demand Interest and the entry into the previously disclosed Restructuring Support Agreement dated August 18, 2020 by the Company with certain beneficial owners and/or investment advisors or managers of discretionary funds, accounts or other entities for the holders of beneficial owners of the 2023 Notes, the 2026 Notes and the Operating Partnership’s $300 million outstanding principal amount of 4.60% notes due 2024 (the “2024 Notes” and, together with the 2023 Notes and the 2026 Notes, the “Notes”) constituted events of default under the Credit Agreement.
On August 19, 2020, the Operating Partnership received a notice of acceleration of obligations under the Credit Agreement (the “Notice of Acceleration”) from the Administrative Agent based on the events of default previously asserted by the Administrative Agent. Pursuant to the Notice of Acceleration, the Administrative Agent declared the $1.123 billion principal amount of the loans together with interest accruing at the base rate and the post-default rate, which as previously disclosed are rates being disputed by the Company, $1.3 million of outstanding letters of credit and all other obligations under the Credit Agreement to be immediately due and payable. The Administrative Agent also terminated the revolving and swingline commitments and the obligation to issue letters of credit under the Credit Agreement and instructed the Operating Partnership to deliver approximately $1.3 million to cash collateralize outstanding letters of credit.
The Company disagrees with the assertions made by the Administrative Agent as the basis for the Notice of Acceleration and, accordingly, the validity of the Notice of Acceleration. The Company continues to dispute the alleged defaults asserted by the Administrative Agent and has engaged with the Administrative Agent since receipt of the Notice of Acceleration. The Administrative Agent has indicated that the lenders intend to continue good faith negotiations with the Company surrounding a consensual restructuring of the Company’s balance sheet. In the event that the Administrative Agent were to attempt to seek to exercise remedies based on these disputed defaults, however, it is the Company’s intention to seek an immediate stay of any such action in a court of appropriate jurisdiction.
If it is determined that an event of default exists under the Credit Agreement and the Notice of Acceleration was properly provided by the Administrative Agent, all unpaid principal, interest and other obligations under the Credit Agreement described above would be due and payable immediately unless the Operating Partnership negotiates an amendment or waiver with the requisite lenders under the Credit Agreement.
An acceleration of the Operating Partnership’s obligations under the Credit Agreement will result in an event of default under the indenture governing the Operating Partnership’s outstanding Notes if the indebtedness under the Credit Agreement is not discharged or the acceleration is not rescinded or annulled within a period of 30 days after notice has been given to the Operating Partnership by the trustee under the indenture governing the Notes or the holders of at least 25% in aggregate principal amount of the applicable series of Notes specifying such default and requiring that the indebtedness under the Credit Agreement be discharged or such acceleration be rescinded. Following the occurrence of any such event of default, the trustee or the holders of at least 25% in aggregate principal amount of the applicable series of Notes may declare all outstanding principal of such series of Notes and accrued and unpaid interest to be due and payable immediately.
ITEM 7.01 Regulation FD Disclosure
On August 25, 2020, CBL Holdings I, Inc., acting in its capacity as the sole general partner of CBL & Associates Limited Partnership, the Operating Partnership (the “Operating Partnership”) of CBL & Associates Properties, Inc. (the
“Company”), issued a letter to all holders of limited partnership interests other than the Company, directing their attention to certain of the Company’s prior public disclosures concerning the implications for limited partners of the Company’s previously announced restructuring process. A copy of the letter is furnished as Exhibit 99.1 to this Report.
The information in this Report and the Exhibit attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.
ITEM 9.01 Financial Statements and Exhibits
|
|
(d) |
Exhibits |
|
|
||
|
|
|
|
|
Exhibit Number |
|
Description |
|
|
Form of Letter dated August 25, 2020 to Limited Partners of CBL & Associates Limited Partnership |
|
|
104 |
|
Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*). (Filed herewith) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|
|
CBL & ASSOCIATES PROPERTIES, INC. |
|
|
|
|
|
|
|
|
/s/ Farzana Khaleel |
|
|
|
|
|
Farzana Khaleel |
|
|
Executive Vice President - |
|
|
Chief Financial Officer and Treasurer |
|
|
CBL & ASSOCIATES LIMITED PARTNERSHIP |
|
|
|
|
|
By: CBL HOLDINGS I, INC., its general partner |
|
|
|
|
|
|
|
|
/s/ Farzana Khaleel |
|
|
|
|
|
Farzana Khaleel |
|
|
Executive Vice President - |
|
|
Chief Financial Officer and Treasurer |
|
|
|
|
Date: August 25, 2020 |
|
Exhibit 99.1
Form of Letter dated August 25, 2020 to Limited Partners of CBL & Associates Limited Partnership
August 25, 2020
[OP Unit Holder]
Re: Interest as a limited partner in CBL & Associates Limited Partnership (the “Partnership”)
Dear [OP Unit Holder],
This letter is to inform you, as a holder of a limited partner interest in the Partnership, of certain potential developments involving the Partnership, its assets and operations.
As you know, CBL & Associates Properties, Inc., a Delaware publicly traded real estate investment trust (NYSE: CBL, herein referred to as “CBL/REIT”), owns approximately 95% of the partnership interests of the Partnership through its two subsidiaries (CBL Holdings I, Inc., a Delaware corporation, sole general partner – approximately 1%; CBL Holdings II, Inc., a Delaware corporation, limited partner – approximately 94%). The CBL/REIT and the Partnership are sometimes collectively referred to herein as the “Company”. The financial statements of the CBL/REIT and the Partnership are consolidated and the annual audited financial statements and other information are included in an Annual Report on Form 10-K. Other periodic reports are likewise filed with the SEC in the form of Quarterly Reports on Form 10-Q and other disclosures via Form 8-K and certain disclosures via press releases (all such disclosures including the Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, disclosures via Form 8-K and press releases are herein collectively referred to as the “Company’s Public Disclosures”). The Company’s Public Disclosures have included the following excerpts from the Company’s Report on Form 8-K filed on August 18, 2020:
Restructuring Support Agreement
On August 18, 2020, CBL & Associates Properties, Inc. (the “REIT”), CBL & Associates Limited Partnership (the “Operating Partnership”) the majority owned subsidiary of the REIT (collectively, the Operating Partnership and the REIT are referred to as the “Company”) entered into a Restructuring Support Agreement (the “RSA”) with certain beneficial owners and/or investment advisors or managers of discretionary funds, accounts or other entities for the holders of beneficial owners of at least 54% of the aggregate principal amount of the Operating Partnership’s 5.25% senior unsecured notes due 2023 (the “2023 Notes”), Operating Partnership’s 4.60% notes due 2024 (the “2024 Notes”) and 5.95% senior unsecured notes due 2026 (the “2026 Notes,” together with the 2023 Notes and 2024 Notes, the “Notes”). …..
Economic Recovery
Pursuant to the RSA, including the Restructuring Term Sheet on the Plan Effective Date:
|
|
guarantees from certain entities and equity pledges of certain entities and (c) a full guarantee by the REIT and (iii) 90% of the common equity in the reorganized Company (the “New Equity Interests”), subject to dilution. (emphasis supplied) |
|
While the Company cannot provide any assurances regarding the consummation of the transaction or transactions contemplated above or what final form these transactions may take, there are ramifications to the limited partners of the Partnership that could occur upon the surrender by the holders of the Notes of their Notes Claims referenced above in return for a pro rata share of the common equity as referenced above. The transactions contemplated may result in a reorganization of the Company, which may trigger “cancellation of indebtedness income” (“CODI”) under Section 108 of the Internal Revenue Code. CODI is generally treated as ordinary income (not capital gains). As a limited partner of the Partnership, if the Company completes a transaction that triggers CODI, you may receive an allocation of a portion of the CODI and, as might be assumed by the excerpt above and as otherwise set out in the Company’s Public Disclosures, there may not be a cash distribution forthcoming from the Partnership to cover all or any portion of any income tax liability that limited partners may incur as the result of the CODI allocation.
In addition, the debt reduction in such a transaction will have an impact on the amount of debt allocations to the limited partners of the Partnership which, for some limited partners, may trigger taxable gain if the amount of debt allocated, if any, to such limited partners is less than their negative capital.
As a final matter and as stated in the Company’s Public Disclosures and as referenced above as to the CODI allocation, the Company has suspended dividend/distribution payments, including dividend payments on the common and preferred stock of the CBL/REIT, the basic distributions on certain limited partner interests of the Partnership (the K-SCUs, L-SCUs and S-SCUs) and distributions on limited partner interests of the Partnership represented by regular common units.
As a limited partner of the Partnership, you have certain rights to elect to convert your limited partner interest to cash or common stock of the CBL/REIT (cash or stock to be at the Company’s election and the cash price being keyed to the 5-day trailing average closing price of the CBL/REIT common stock from the election date). Should you determine that it is in your best interests to exercise those rights, the forms for such an election are attached to the Partnership agreement and may also be obtained by contacting Jeff Curry, Chief Legal Officer of the CBL/REIT. His contact information is set forth below.
The potential circumstances described above, among others, are important for you to consider as to your limited partner interest in the Partnership. The Company can provide no assurances that it will complete the contemplated transaction or what the final ramifications of this or any future transactions would be for the limited partners. THIS LETTER IS NOT TAX ADVICE AND SHOULD NOT BE CONSTRUED AS TAX ADVICE. Whether or not you remain as a limited partner of the Partnership, you are encouraged to review these potential circumstances with your respective financial/tax advisors as well as the tax ramifications that may apply on any conversion election you may make.
Sincerely
CBL & Associates Limited Partnership
By: CBL Holdings I, Inc., its sole general partner
By:_________________________
Name:_________________________
Title:_________________________
Jeffery V. Curry, Chief Legal Officer
2030 Hamilton Place Blvd., Suite 500
Chattanooga, TN 37421
Office: (423) 490-8642
Telefax: (423) 893-4371
Email: Jeff.Curry@cblproperties.com