Valley Mall owner files bankruptcy to secure new financing

Pennsylvania Real Estate Investment Trust, owner of Hagerstown's Valley Mall and other commercial properties, has filed for Chapter 11 bankruptcy.

In an announcement Sunday, PREIT said the move was part of implementing a "prepackaged financial restructuring plan" to help secure $150 million in new financing.

PREIT's CEO said the filing "has no impact on our operations."

The company said the action "will ensure that PREIT can continue all business operations without interruption while it obtains necessary approvals of its financial restructuring plan."

In a separate move this year, PREIT sold three outparcels on the Valley Mall campus in Halfway. The properties, housing Olive Garden, BJ's Restaurant & Brewhouse and the Firestone Complete Auto Care business, sold for a total of more than $10.7 million to a California holding company, according to online deed records.

PREIT's "primary focus remains creating compelling retail and experiential destinations while prioritizing the health and safety of its employees, partners, customers and communities," Heather Crowell, PREIT's executive vice president of strategy and communications, wrote Monday in an email.

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The company has a "strong portfolio in key markets" and "a clear strategy to continue improving our properties through the introduction of a mix of uses," she wrote.

At Valley Mall, for example, space that once was devoted to anchor retailers has been transformed into an arcade and a fitness center.

"Valley Mall is a great performer for us, and we have no intention of making any ownership changes," Crowell wrote.

'Financially stronger'

Like many businesses, PREIT and Valley Mall were hit by the pandemic-prompted economic slowdown in the spring.

In March, Gov. Larry Hogan ordered the closing of many businesses, including enclosed malls, in an effort to stem the spread of the novel coronavirus, which can cause COVID-19. Valley Mall had to close its doors March 19 at 5 p.m.

Hogan gradually eased those restrictions. The mall reopened June 20, with reduced hours, mask requirements and other precautions in place.

On Oct. 14, PREIT and its lenders entered what PREIT called a "restructuring support agreement."

PREIT said the banks have committed to provide an additional $150 million "to recapitalize the business and extend the company's debt maturity schedule, supporting PREIT's operations and the continued execution of its strategic priorities."

"We are pleased to be moving forward with strengthening the company's balance sheet and positioning it for long-term success through our prepackaged plan," Joseph F. Coradino, PREIT's CEO, said in Sunday's news release. "We are grateful for the significant support we have received from a substantial majority of our lenders, which we expect will enable us to complete our financial restructuring on an expedited basis.

"Today's announcement has no impact on our operations — our employees, tenants, vendors and the communities we serve — and we remain committed to continuing to deliver top-tier experiences and improving our portfolio. With the overwhelming support of our lenders, we look forward to quickly emerging from this process as a financially stronger company with the resources and support to continue creating diverse, multi-use ecosystems throughout our portfolio."

PREIT will pay all vendors, suppliers and employees during the course of the Chapter 11 process, according to the release.

The financial restructuring is not expected to have any impact on the company's shareholders, and PREIT common and preferred shares are expected to continue to trade in the normal course, the company said.

The company filed the Chapter 11 action in the U.S. Bankruptcy Court, District of Delaware, in Wilmington.

PREIT also filed a number of first-day motions to support its operations during the court-supervised process, including the continued payment of employee wages and benefits without interruption. The company said it expects to receive court approval for those requests.