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Combined Guarantor Subsidiaries - Organization and Basis of Presentation | 3 Months Ended
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Mar. 31, 2020
Condensed Financial Statements Captions [Line Items] |
Organization and Basis of Presentation | Note 1 – Organization and Basis of Presentation Unless stated otherwise or the context otherwise requires, references to the "Company" mean CBL & Associates Properties, Inc. and its subsidiaries. References to the "Operating Partnership" mean CBL & Associates Limited Partnership and its subsidiaries. CBL & Associates Properties, Inc. (“CBL”), a Delaware corporation, is a self-managed, self-administered, fully-integrated real estate investment trust (“REIT”) that is engaged in the ownership, development, acquisition, leasing, management and operation of regional shopping malls, open-air and mixed-use centers, outlet centers, associated centers, community centers and office properties. Its properties are located in 26 states, but are primarily in the southeastern and midwestern United States. CBL conducts substantially all its business through CBL & Associates Limited Partnership (the “Operating Partnership”), which is a variable interest entity ("VIE"). The Operating Partnership consolidates the financial statements of all entities in which it has a controlling financial interest or where it is the primary beneficiary of a VIE. As of March 31, 2020, the Operating Partnership owned interests in the following properties:
|  |  |  |  |  | All Other Properties |  |  |  |  |
|  | Malls (1) |  |  | Associated Centers |  |  | Community Centers |  |  | Office Buildings and Other |  |  | Total |
Consolidated Properties |  |  | 53 |  |  |  | 20 |  |  |  | 1 |  |  |  | 4 |  | (2) |  | 78 |
Unconsolidated Properties (3) |  |  | 10 |  |  |  | 3 |  |  |  | 5 |  |  |  | 2 |  |  |  | 20 |
Total |  |  | 63 |  |  |  | 23 |  |  |  | 6 |  |  |  | 6 |  |  |  | 98 |
(1) | Category consists of regional malls, open-air centers and outlet centers (including one mixed-use center).
(2) | Includes CBL's two corporate office buildings.
(3) | The Operating Partnership accounts for these investments using the equity method because one or more of the other partners have substantive participating rights.
At March 31, 2020, the Operating Partnership had an interest in two self-storage facilities that were under development (the "Construction Properties"). The Malls, All Other Properties ("Associated Centers, Community Centers, Office Buildings and Other") and the Construction Properties are collectively referred to as the “Properties” and individually as a “Property.” CBL is the 100% owner of two qualified REIT subsidiaries, CBL Holdings I, Inc. and CBL Holdings II, Inc. At March 31, 2020, CBL Holdings I, Inc., the sole general partner of the Operating Partnership, owned a 1.0% general partner interest in the Operating Partnership and CBL Holdings II, Inc. owned an 94.2% limited partner interest for a combined interest held by CBL of 95.2%. The noncontrolling interest in the Operating Partnership is held by CBL & Associates, Inc., its shareholders and affiliates and certain senior officers of the Company (collectively "CBL's Predecessor"), all of which contributed their interests in certain real estate properties and joint ventures to the Operating Partnership in exchange for a limited partner interest when the Operating Partnership was formed in November 1993, and by various third parties. In March 2020, the Company issued 16,333,947 shares of the Company’s common stock to CBL’s Predecessor in exchange for a like number of common units of limited partnership interest in the Operating Partnership pursuant to exchange notices received from CBL’s Predecessor. At March 31, 2020, CBL’s Predecessor owned a 0.9% limited partner interest and third parties owned a 3.9% limited partner interest in the Operating Partnership. CBL's Predecessor also owned 21.3 million shares of CBL’s common stock at March 31, 2020, for a total combined effective interest of 11.5% in the Operating Partnership. The Operating Partnership conducts the Company’s property management and development activities through its wholly owned subsidiary, CBL & Associates Management, Inc. (the “Management Company”), to comply with certain requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). The accompanying condensed consolidated financial statements are unaudited; however, they have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in conjunction with the rules and regulations of the Securities and Exchange Commission ("SEC"). Accordingly, they do not include all of the disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting solely of normal recurring matters) necessary for a fair presentation of the financial statements for these interim periods have been included. All intercompany transactions have been eliminated. The results for the interim period ended March 31, 2020 are not necessarily indicative of the results to be obtained for the full fiscal year. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in its Annual Report on Form 10-K, as amended, for the year ended December 31, 2019. COVID-19 The COVID-19 pandemic has had, and likely will continue to have, repercussions across local, national and global economies and financial markets. COVID-19 has impacted all states where the Company’s tenants operate their businesses or where the Company’s properties are located and measures taken to prevent or remediate COVID-19, including “shelter-in place” or “stay-at-home” orders or other quarantine mandates issued by local, state or federal authorities, have had an adverse effect on its business and the businesses of its tenants. The full extent of the adverse impact on, among other things, the Company’s results of operations, liquidity (including its ability to access capital markets), the possibility of future impairments of long-lived assets or its investments in unconsolidated joint ventures, its compliance with debt covenants, its ability to renew and re-lease its leased space, the outlook for the retail environment, potential bankruptcies or other store closings and its ability to develop, acquire, dispose or lease properties, is unknown and will depend on future developments, which are highly uncertain and cannot be predicted. The Company expects a material adverse impact on its revenues, results of operations, and cash flows for the year ended December 31, 2020. The situation is rapidly changing and additional impacts to the business may arise that the Company is not aware of currently. Listing Criteria On February 5, 2020, the Company received notice from the New York Stock Exchange ("NYSE") that its common stock is no longer in compliance with NYSE continued listing criteria set forth in Section 802.01C of the Listed Company Manual of the NYSE, which require listed companies to maintain an average closing share price of at least $1.00 over a period of 30 consecutive trading days. The Company has until October 14, 2020, inclusive of extensions of the cure period provided by the NYSE in response to the COVID-19 pandemic, to regain compliance with the continued listing criteria. During this period, the Company expects its common stock to continue to trade on the NYSE, which will allow for flexibility in addressing this matter. On May 7, 2020, the Company’s shareholders voted to approve an amendment to the Company’s Amended and Restated Certificate of Incorporation, as amended, to effect a reverse stock split at a ratio between 1-for-5 and 1-for-25, and a proportionate reduction in the number of authorized shares of common stock, to be determined at the discretion of the board of directors for the purpose of complying with NYSE Listing Standards, subject to the board of directors’ discretion to abandon this amendment. The Company’s board of directors has not yet taken action to effect the reverse stock split . The Company intends to actively evaluate and monitor the price of its common stock between now and October 2020. A delisting of the Company’s common stock from the NYSE could negatively impact it by, among other things, reducing the trading liquidity of, and the market price for, its common stock. Liquidity and Going Concern Considerations In accordance with the accounting guidance related to the presentation of financial statements, when preparing financial statements for each annual and interim reporting period, management evaluates whether there are conditions or events that, when considered in the aggregate, raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. In making its assessment, management considered the Company’s current financial condition and liquidity sources, including current funds available, forecasted future cash flows and conditional and unconditional obligations due over the next twelve months. The Company was in compliance with the financial covenants of its secured credit facility and the senior unsecured notes (the “Notes”) as of March 31, 2020, with the exception of one covenant under the secured credit facility. At March 31, 2020, the Company was not in compliance with a covenant under the secured credit facility, which provides that the Company may not have more than $100,000 of cash on hand that constitutes borrowings on the secured line of credit. In March 2020, the Company drew $280,000 from the secured line of credit and anticipated promptly purchasing $180,000 of U.S. Treasury securities, which would leave $100,000 of cash on hand from such borrowings. However, due to market conditions, the Company was not able to purchase the U.S. Treasury securities promptly, which resulted in the Company violating this covenant. Violation of this covenant provides the lenders with the option to accelerate the maturity of the senior secured credit facility. The administrative agent of the secured credit facility notified the Company that it was in default and that the administrative agent and lenders reserve all rights and remedies under the secured credit facility. The lenders have not exercised their right to accelerate the maturity of the secured credit facility. In March 2020, the Company used $154,228 to purchase U.S. Treasury securities and subsequent to March 31, 2020 utilized an additional $ 26,366 to fund April debt service payments and operating expenses, which reduced the amount of cash on hand that constitutes borrowings on the secured line of credit to less than $ 100,000 . However, this did not cure the default per the terms of the senior secured credit facility. Management will pursue obtaining a waiver from the lenders. If management is not able to obtain a waiver directly, then management will seek to obtain a waiver as part of the alternatives it is exploring, as described below. The Company has considered the projected impact of COVID-19 on its cash flows and its analysis of future compliance with the financial covenants and has determined that it is probable it will fail to meet the minimum debt yield covenant under the senior secured credit facility during the third quarter of 2020, the fourth quarter of 2020 and the first quarter of 2021. The minimum debt yield covenant provides that the ratio of the adjusted net operating income, as defined, of the borrowing base properties that secure the senior secured credit facility to the total outstanding balance on the senior secured credit facility must be greater than 10.0%. Violation of this covenant provides the lenders with the option to accelerate the maturity of the senior secured credit facility. The Company could remain in compliance with the debt yield covenant if it (i) added additional unencumbered assets to the collateral pool, subject to lender approval, which is not to be unreasonably withheld, (ii) paid down the amount of debt outstanding with projected available cash or (iii) negotiated a waiver of the covenant with the lenders. Management has engaged Weil, Gotshal & Manges LLP and Moelis & Company LLC (the “Advisors”) to assist the Company in exploring several alternatives to reduce overall leverage and interest expense and to extend the maturity of its debt including (i) the senior secured credit facility, which includes a revolving facility with a balance of $675,925 and term loan with a balance of $456,250 as of March 31, 2020, that matures in July 2023 and (ii) the Notes with balances of $450,000, $300,000, and $625,000, as of March 31, 2020, that mature in December 2023 , October 2024 and December 2026 , respectively, as well as the cumulative unpaid dividends on the Company’s preferred stock and the special common units of limited partnership interest in the Operating Partnership. The Advisors recently commenced discussions with advisors to certain holders of the Notes and the credit committee of the senior secured credit facility. Management may pursue a comprehensive solution that includes a potential exchange of debt with the holders of the Notes, addressing the preferred stock of the Company and the special common units of limited partnership interest in the Operating Partnership, amendments to the financial covenants under the senior secured credit facility and the Notes and other options that may result in the reorganization of the Company. As described in Note 15 – Subsequent Events, the Company elected to not make the $11,813 interest payment due and payable on June 1, 2020, with respect to the Operating Partnership’s 5.25% senior unsecured notes due 2023 (the “2023 Notes”) (the “Interest Payment”). Under the indenture governing the 2023 Notes, the Operating Partnership has a 30-day grace period to make the Interest Payment before the nonpayment is considered an event of default with respect to the 2023 Notes. Any event of default under the 2023 Notes for nonpayment of the Interest Payment would also be considered an event of default under the Operating Partnership’s senior secured credit facility, which could lead to an acceleration of amounts due under the facility. Further, if the trustee for the 2023 Notes should exercise its right to accelerate the maturity of the full balance owed on the 2023 Notes as a result of such an event of default, that would also constitute an event of default under the Operating Partnership’s 4.60% senior unsecured notes due 2024 and the Operating Partnership’s 5.95% senior notes due 2026, which could lead to the acceleration of all amounts due under those notes. The Company has elected to enter the 30-day grace period with respect to the Interest Payment in order to advance discussions with its lenders and explore alternative strategies. The Company was notified by the administrative agent of the senior secured credit facility that the failure to make the Interest Payment constitutes a default under the senior secured credit facility and that, if not cured within the applicable 30-day grace period, it will be an event of default under the senior secured credit facility. The Company could prevent an event of default if it paid the Interest Payment prior to the expiration of the 30-day grace period or if it reached an alternative arrangement with the holders of the 2023 Notes. Given the impact of the COVID-19 pandemic on the retail and broader markets, the ongoing weakness of the credit markets and significant uncertainties associated with each of these matters, the Company believes that there is substantial doubt that it will continue to operate as a going concern within one year after the date these condensed consolidated financial statements are issued. The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Accordingly, the condensed consolidated financial statements do not reflect any adjustments related to the recoverability of assets and satisfaction of liabilities that might be necessary should the Company be unable to continue as a going concern.
Guarantor Subsidiaries |
Condensed Financial Statements Captions [Line Items] |
Organization and Basis of Presentation | Note 1 – Organization and Basis of Presentation CBL & Associates Properties, Inc. (“CBL”), a Delaware corporation, is a self-managed, self-administered, fully-integrated real estate investment trust (“REIT”) that is engaged in the ownership, development, acquisition, leasing, management and operation of regional shopping malls, open-air and mixed-use centers, outlet centers, associated centers, community centers and office properties. Its properties are located in 26 states, but are primarily in the southeastern and midwestern United States. CBL conducts substantially all of its business through CBL & Associates Limited Partnership (the “Operating Partnership”), which is a variable interest entity ("VIE"). The Operating Partnership consolidates the financial statements of all entities in which it has a controlling financial interest or where it is the primary beneficiary of a VIE. In January 2019, the Operating Partnership entered into a new $1,185,000 senior secured credit facility which replaced all of the Operating Partnership’s prior unsecured bank facilities. The secured credit facility is secured by 17 malls and 3 associated centers that are owned by 36 wholly owned subsidiaries of the Operating Partnership (collectively the “Combined Guarantor Subsidiaries”). The Combined Guarantor Subsidiaries own an additional four malls, two associated centers and four mortgage notes receivable that are not collateral for the secured credit facility. The properties that are collateral for the secured credit facility and the properties and mortgage notes receivable that are not collateral are collectively referred to as the “Guarantor Properties”. In addition to the secured credit facility, the Operating Partnership’s debt includes three separate series of senior unsecured notes (the “Notes”). Based on the terms of the Notes, to the extent that any subsidiary of the Operating Partnership executes and delivers a guarantee to another debt facility, the Operating Partnership shall also cause the subsidiary to guarantee the Operating Partnership’s obligations under the Notes on a senior basis. In January 2019, the Combined Guarantor Subsidiaries entered a guarantee agreement with the issuer of the Notes to satisfy the guaranty requirement. The guarantees related to the secured credit facility and the Notes expire upon maturity of the secured credit facility and repayment of the debt under the secured credit facility. The Combined Guarantor Subsidiaries maximum guarantee related to the secured credit facility is $1,185,000 as of March 31, 2020, and the maximum guarantee related to the Notes is $1,375,000 as of March 31, 2020. The percentage of actual Guarantor Properties that are pledged as collateral on the secured credit facility in relation to the Combined Guarantor Subsidiaries as of and for the three months ended March 31, 2020 is shown in the table below:
|  | Assets |  |  | Liabilities |  |  | Revenue |  |  | Net Income |
Guarantor Properties pledged as collateral on the secured credit facility |  | $ | 1,310,359 |  |  | $ | 29,720 |  |  | $ | 51,217 |  |  | $ | 15,402 |
Combined Guarantor Subsidiaries |  | $ | 1,636,970 |  |  | $ | 285,618 |  |  | $ | 65,427 |  |  | $ | 18,835 |
Guarantor Properties pledged as collateral on the secured credit facility as % of Combined Guarantor Subsidiaries |  |  | 80.0 | % |  |  | 10.4 | % |  |  | 78.3 | % |  |  | 81.8 | %
The Combined Guarantor Subsidiaries and Guarantor Properties consist of the following:
Combined Guarantor Subsidiaries |  | Guarantor Properties |  | Location
CW Joint Venture, LLC (1) Arbor Place Limited Partnership Multi-GP Holdings, LLC |  | Arbor Place (2) Greenbrier Mall (2) Park Plaza (2) Shoppes at St. Claire Square (2) St. Claire Square (2) |  | Douglasville, GA Chesapeake, VA Little Rock, AR Fairview Heights, IL Fairview Heights, IL
CBL/Westmoreland, L.P. CBL/Westmoreland I, LLC CBL/Westmoreland II, LLC CW Joint Venture, LLC Arbor Place Limited Partnership Multi-GP Holdings, LLC |  | Westmoreland Mall Westmoreland Crossing |  | Greensburg, PA Greensburg, PA
Cherryvale Mall, LLC |  | CherryVale Mall |  | Rockford, IL
Madison/East Towne, LLC Madison Joint Venture, LLC CBL/Madison I, LLC |  | East Towne Mall |  | Madison, WI
Frontier Mall Associates Limited Partnership Mortgage Holdings LLC (3) |  | Frontier Mall |  | Cheyenne, WY
JG Winston-Salem, LLC |  | Hanes Mall |  | Winston-Salem, NC
Imperial Valley Mall II, L.P. Imperial Valley Mall GP, LLC Imperial Valley Mall, L.P. CBL/Imperial Valley, GP, LLC |  | Imperial Valley Mall |  | El Centro, CA
Kirkwood Mall Acquisition LLC Kirkwood Mall Mezz LLC CBL/Kirkwood Mall, LLC |  | Kirkwood Mall |  | Bismarck, ND
Layton Hills Mall CMBS, LLC |  | Layton Hills Mall and Cinema Layton Hills Plaza Layton Hills Convenience Center |  | Layton, UT Layton, UT Layton, UT
Mall del Norte, LLC MDN/Laredo GP, LLC |  | Mall del Norte and Cinema |  | Laredo, TX
Mayfaire Town Center, LP Mayfaire GP, LLC |  | Mayfaire Town Center |  | Wilmington, NC
Mortgage Holdings, LLC (3) |  | Four mortgage notes receivable (2) |  | Chattanooga, TN
Hixson Mall, LLC |  | Northgate Mall |  | Chattanooga, TN
Pearland Town Center Limited Partnership Pearland Ground, LLC Pearland Town Center GP, LLC |  | Pearland Town Center - Retail Pearland Town Center - Office |  | Pearland, TX
POM-College Station, LLC Mortgage Holdings, LLC (3) |  | Post Oak Mall |  | College Station, TX
CBL RM-Waco, LLC CBL/Richland G.P., LLC |  | Richland Mall |  | Waco, TX
CBL SM - Brownsville, LLC CBL/Sunrise GP, LLC |  | Sunrise Mall |  | Brownsville, TX
Turtle Creek Limited Partnership Mortgage Holdings, LLC (3) |  | Turtle Creek Mall |  | Hattiesburg, MS
Madison/West Towne, LLC Madison Joint Venture, LLC CBL/Madison I, LLC |  | West Towne Mall |  | Madison, WI
Madison Joint Venture, LLC (4) CBL/Madison I, LLC |  | West Town Crossing (2) |  | Madison, WI
(1) | CW Joint Venture, LLC is a Guarantor Subsidiary because it is an entity in the ownership chain of Westmoreland Mall and Westmoreland Crossing.
(2) | Property/asset is not collateral on the secured credit facility.
( 3 ) | Mortgage Holdings, LLC is a Guarantor Subsidiary because it is an entity in the ownership chains of Frontier Mall, Post Oak Mall and Turtle Creek Mall.
( 4 ) | Madison Joint Venture, LLC is a Guarantor Subsidiary because it is an entity in the ownership chain of East Towne Mall and West Towne Mall.
Each of the Combined Guarantor Subsidiaries meet the criteria in Rule 3-10(f) of SEC Regulation S-X to provide condensed consolidating financial information as additional disclosure in the notes to the Operating Partnership’s condensed consolidated financial statements or within Management’s Discussion and Analysis which accompanies the condensed consolidated financial statements because each Combined Guarantor Subsidiary is 100% owned by the Operating Partnership, the guaranty issued by each Combined Guarantor Subsidiary is full and unconditional and the guaranty issued by each Combined Guarantor Subsidiary is joint and several. However, the Operating Partnership has elected to provide these condensed combined financial statements and accompanying notes for the Combined Guarantor Subsidiaries in lieu of including the condensed consolidating financial information in the notes to its condensed consolidated financial statements. These combined financial statements and notes are presented as an exhibit to the Operating Partnership's quarterly report on Form 10-Q for ease of reference. The results for the interim period ended March 31, 2020 are not necessarily indicative of the results to be obtained for the full fiscal year. COVID-19 The current novel coronavirus (“COVID-19”) pandemic has had, and likely will continue to have, repercussions across local, national and global economies and financial markets. COVID-19 has impacted all states where the Combined Guarantor Subsidiaries’ tenants operate their businesses or where their properties are located and measures taken to prevent or remediate COVID-19, including “shelter-in place” or “stay-at-home” orders or other quarantine mandates issued by local, state or federal authorities, have had an adverse effect on their business and the businesses of their tenants. The full extent of the adverse impact on, among other things, the Combined Guarantor Subsidiaries’ results of operations, liquidity (including their ability to access capital markets), the possibility of future impairments of long-lived assets, their compliance with debt covenants, their ability to renew and re-lease their leased space, the outlook for the retail environment, potential bankruptcies or other store closings and their ability to develop, acquire, dispose or lease properties for their portfolio, is unknown and will depend on future developments, which are highly uncertain and cannot be predicted. The Combined Guarantor Subsidiaries expect a material adverse impact on their revenues, results of operations, and cash flows for the year ended December 31, 2020. The situation is rapidly changing and additional impacts to the business may arise that the Combined Guarantor Subsidiaries are not aware of currently. Liquidity and Going Concern Considerations In accordance with the accounting guidance related to the presentation of financial statements, when preparing financial statements for each annual and interim reporting period, management evaluates whether there are conditions or events that, when considered in the aggregate, raise substantial doubt about the Combined Guarantor Subsidiaries’ ability to continue as a going concern within one year after the date that the financial statements are issued. In making its assessment, management considered the Combined Guarantor Subsidiaries’ current financial condition and liquidity sources, including current funds available, forecasted future cash flows and conditional and unconditional obligations due over the next twelve months. As described above, the Operating Partnership’s senior secured credit facility and the Notes are secured by 17 malls and 3 associated centers that are owned by the Combined Guarantor Subsidiaries, which represent a substantial portion of the real estate assets owned by the Combined Guarantor Subsidiaries. At March 31, 2020, the Operating Partnership was in violation of a covenant under its senior secured credit facility, which provides that the Operating Partnership may not have more than $100,000 of cash on hand that constitutes borrowings on the secured line of credit. In March 2020, the Operating Partnership drew $280,000 from its secured line of credit and anticipated promptly purchasing $180,000 of U.S. Treasury securities, which would leave $100,000 of cash on hand from such borrowings. However, due to market conditions, the Operating Partnership was not able to purchase the U.S. Treasury securities promptly, which resulted in the Operating Partnership violating this covenant. Violation of this covenant provides the senior secured credit facility lenders with the option to accelerate the maturity of the senior secured credit facility. The administrative agent of the senior secured credit facility notified the Operating Partnership that it was in default and that the administrative agent and lenders reserve all rights and remedies under the senior secured credit facility. The lenders have not exercised their right to accelerate the maturity of the senior secured credit facility. In March 2020, the Operating Partnership used $154,228 to purchase U.S. Treasury securities and subsequent to March 31, 2020 utilized an additional $26,366 to fund April debt service payments and operating expenses, which reduced the amount of cash on hand that constitutes borrowings on the secured line of credit to less than $100,000. However, this did not cure the default per the terms of the senior secured credit facility. The Operating Partnership will pursue obtaining a waiver from the lenders. If the Operating Partnership is not able to obtain a waiver directly, then it will seek to obtain a waiver as part of the alternatives it is exploring, as described below. The Operating Partnership has considered the projected impact of COVID-19 on its cash flows and its analysis of future compliance with the financial covenants and has determined that it is probable it will fail to meet the minimum debt yield covenant under the senior secured credit facility during third quarter of 2020, the fourth quarter of 2020 and the first quarter of 2021. The minimum debt yield covenant provides that the ratio of the adjusted net operating income, as defined, of the Guarantor Properties that secure the senior secured credit facility to the total outstanding balance on the senior secured credit facility must be greater than 10.0%. Violation of this covenant provides the lenders with the option to accelerate the maturity of the senior secured credit facility. The Operating Partnership could remain in compliance with the debt yield covenant if it (i) added additional unencumbered assets to the collateral pool, subject to lender approval, which is not to be unreasonably withheld, (ii) paid down the amount of debt outstanding with projected available cash or (iii) negotiated a waiver of the covenant with the lenders. Management of CBL has engaged Weil, Gotshal & Manges LLP and Moelis & Company LLC (the “Advisors”) to assist CBL in exploring several alternatives to reduce overall leverage and interest expense and to extend the maturity of its debt including (i) the senior secured credit facility, which includes a revolving facility with a balance of $675,925 and term loan with a balance of $456,250 as of March 31, 2020, that matures in July 2023 and (ii) the Notes with balances of $450,000, $300,000, and $625,000, as of March 31, 2020, that mature in December 2023, October 2024 and December 2026, respectively, as well as the cumulative unpaid dividends on CBL’s preferred stock and the special common units of limited partnership interest in the Operating Partnership. The Advisors recently commenced discussions with advisors to certain holders of the Notes and the credit committee of the senior secured credit facility. Management of CBL may pursue a comprehensive solution that includes a potential exchange of debt with the holders of the Notes, addressing the preferred stock of CBL and the special common units of limited partnership interest in the Operating Partnership, amendments to the financial covenants under the senior secured credit facility and the Notes and other options that may result in the reorganization of CBL and the Operating Partnership. As described in Note 12 – Subsequent Events , the Operating Partnership elected to not make the $11,813 interest payment due and payable on June 1, 2020, with respect to its 5.25% senior unsecured notes due 2023 (the “2023 Notes”) (the “Interest Payment”). Under the indenture governing the 2023 Notes, the Operating Partnership has a 30-day grace period to make the Interest Payment before the nonpayment is considered an event of default with respect to the 2023 Notes. Any event of default under the 2023 Notes for nonpayment of the Interest Payment would also be considered an event of default under the Operating Partnership’s senior secured credit facility, which could lead to an acceleration of amounts due under the facility. Further, if the trustee for the 2023 Notes should exercise its right to accelerate the maturity of the full balance owed on the 2023 Notes as a result of such an event of default, that would also constitute an event of default under the Operating Partnership’s 4.60% senior unsecured notes due 2024 and the Operating Partnership’s 5.95% senior notes due 2026, which could lead to the acceleration of all amounts due under those notes. The Operating Partnership has elected to enter the 30-day grace period with respect to the Interest Payment in order to advance discussions with its lenders and explore alternative strategies. The Operating Partnership was notified by the administrative agent of the senior secured credit facility that the failure to make the Interest Payment constitutes a default under the senior secured credit facility and that, if not cured within the applicable 30-day grace period, it will be an event of default under the senior secured credit facility. The Operating Partnership could prevent an event of default if it paid the Interest Payment prior to the expiration of the 30-day grace period or if it reached an alternative arrangement with the holders of the 2023 Notes. Given the impact of the COVID-19 pandemic on the retail and broader markets, the ongoing weakness of the credit markets and significant uncertainties associated with each of these matters, CBL and the Operating Partnership believe that there is substantial doubt that they will each continue to operate as a going concern within one year after the date their condensed consolidated financial statements are issued. Since the Operating Partnership’s senior secured credit facility and the Notes are secured by 17 malls and 3 associated centers that are owned by the Combined Guarantor Subsidiaries, the Combined Guarantor Subsidiaries believe that there is substantial doubt that they will continue to operate as a going concern within one year after the date their condensed combined financial statements are issued. The accompanying condensed combined financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Accordingly, the condensed combined financial statements do not reflect any adjustments related to the recoverability of assets and satisfaction of liabilities that might be necessary should the Combined Guarantor Subsidiaries be unable to continue as a going concern .

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