Washington Prime Group (WPG), one of the biggest retail real estate companies in the US could seek bankruptcy protection under Chapter 11 of the US Bankruptcy Code this week based on the result of its forbearance agreement with its creditors later today. This would help WPG manage its ~$4bn debt. The group had entered the forbearance agreement with its lenders after it missed a $23.2mn interest payment on its 6.45% 2024s in February this year. WPG is in talks with its lenders for ~$100mn debtor-in-possession financing to aid its operations. Even though the company faces better business prospects in the future, it has faced a turbulent time since the onset of the pandemic that forced it to shut some of its ~100 shopping centers across the US and also relax rent collections from tenants as many businesses were unable to pay rent. The rental income from tenants including JCPenney, Ascenda Retail, Bed Bath & Beyond and Macy’s Inc was sharply down by $127mn in FY2020 compared to FY2019. The Ohio based company’s rental income remained down ~$20mn even in 1Q2021 compared to last year. Its cash flows in 1Q were also down 67% YoY at $3.3mn. Washington Prime competitors CBL & Associates Properties Inc and Pennsylvania Real Estate Investment Trust were forced to file for the Chapter 11 bankruptcy last year to restructure their debt. The group was downgraded to D by S&P after it was not able to furnish its interest payment even after completing the 30-day grace period on March 17.

Washington Prime’s 6.45% 2024s were down 0.18 to trade at 64.94 cents on the dollar in the secondary markets.

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