PREIT files for Chapter 11 bankruptcy for a second time since 2020 (OTCMKTS:PRET)

Pennsylvania REIT (OTC:PRET), also known as PREIT, filed for Chapter 11 bankruptcy proceedings after it reached an agreement with lenders to reorganize the shopping center real estate investment trust’s balance sheet, the company said Monday.

The prepackaged reorganization plan received support by 100% of PREIT’s (OTC:PRET) first and second lien lenders.

The reorganization will strengthen its balance sheet by reducing its debt by ~$880M and extending its maturity runway, it said. The company has received commitments for $135M of debtor-in-possession and exit financing from a group of investors led by Redwood Capital Management and Nut Tree Capital Management.

Chapter 11 proceedings allow a company to continue its business operations as it restructures its debt. PREIT expects that it will be able to emerge from bankruptcy by early February 2024.

Existing preferred and common shares will be canceled, and PREIT (OTC:PRET) will no longer be a publicly traded company. An aggregate $10M payment, net of costs defined in the prepackaged plan, will be provided to holders of existing preferred and common stock. Some 70% of that payment will go to preferred shareholders, with the remaining 30% going to common shareholders.

The company will pay all vendors, suppliers, and employees during the proceedings.

Under the reorganization plan, first lien lenders have the option to receive either a cash payment equal to 100% of their claims or the option to convert their claims into term loans under the exit facility in an amount equal to 101% of their claims.

Second lien lenders will get their pro rata share of 65% of new equity interests in the reorganized PREIT and second lien lenders who commit to backstop the exit facility will receive 35% of the new equity interests in the reorganized PREIT.

This is PREIT’s (OTC:PRET) second Chapter 11 filing in the past five years. In the wake of the COVID pandemic, it filed for bankruptcy proceedings in November 2020 and emerged from Chapter 11 in December.

PREIT’s stock has dropped 80% year-to-date, and 41% in the past month.