Washington Prime Group Inc. (NYSE:WPG), owner of 102 malls in the U.S., filed for Chapter 11 bankruptcy protection on late Sunday in Texas amidst the COVID-19 brick-and-mortar sales plunge.
Washington Prime Group Files For Bankruptcy
The company seeks to “implement a comprehensive and consensual financial restructuring,” securing $100 million in new money debtor-in-possession financing to keep their operations running, with a focus on the Midwest, East Coast and Florida markets. In late March, the company assets were valued at $4 billion with a reported debt of $3.5 billion.
“The COVID-19 pandemic has created significant challenges for many companies, including Washington Prime Group, making a Chapter 11 filing necessary to reduce the Company’s outstanding indebtedness,” the company said in a press release.
Washington Prime will continue to operate after reaching a restructuring agreement with creditors led by SVPGlobal, owners of both 73% of the company's secured corporate debt and 67% of the outstanding principal amount of the unsecured notes.
The Ohio-based real estate player had reported $661 million revenue in 2019 before a sharp drop to $506.7 million by the end of 2020. In its home state, Washington Prime Group owns the Polaris Fashion Place mall and a further eight centers including Indian Mound Mall in Heath, the Mall at Fairfield Commons in Beavercreek, Dayton Mall, and the New Towne Mall in New Philadelphia.
Pandemic And Rising E-Commerce To Blame
COVID-19 seemed the last straw on a mall industry already struggling with the rise of e-commerce and new buyers’ purchase habits.
In the last year, the pandemic also brought down several retailers—some of them Washington Prime Group’s—such as J.C. Penney, Brooks Brothers, J. Crew, Pier 1, Aldo, Stein Mart, New York & Company, Tuesday Morning and Guitar Center.
Lou Conforti, CEO of Washington Prime Group told Business Insider last year that companies in this sector were “very passive” in adapting to serve additional purposes to sail the storm.
According to a Coresight Research study, up to 25% of the approximately 1,000 malls in the U.S. could close in three to five years. Washington Prime Group is the latest bankruptcy filing after sounding ones like CBL and PREIT, both accounting for 130 malls in the US.
In 2020, retail sales in the U.S. shrank by 10.5% while predictions by the National Retail Federation this year talk of a 13.5% rise –nearly double the 6.5% prediction earlier in February.