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Mortgage and Other Indebtedness, Net

3 Months Ended

Mar. 31, 2020

Note 8 – Mortgage and Other Indebtedness, Net

Debt of the Company

CBL has no indebtedness. Either the Operating Partnership or one of its consolidated subsidiaries, that it has a direct or indirect ownership interest in, is the borrower on all of the Company's debt. CBL is a limited guarantor of the senior unsecured notes (the "Notes"), as described below, for losses suffered solely by reason of fraud or willful misrepresentation by the Operating Partnership or its affiliates.

The Company also provides a similar limited guarantee of the Operating Partnership's obligations with respect to its secured credit facility and secured term loan as of March 31, 2020.

Debt of the Operating Partnership

Net mortgage and other indebtedness consisted of the following:

	March 31, 2020						December 31, 2019
	Amount			Weighted- Average Interest Rate ⁽¹⁾			Amount			Weighted- Average Interest Rate ⁽¹⁾
Fixed-rate debt:
Non-recourse loans on operating Properties	$	1,236,179			5.19	%	$	1,330,561			5.27	%
Senior unsecured notes due 2023 ⁽²⁾		448,016			5.25	%		447,894			5.25	%
Senior unsecured notes due 2024 ⁽³⁾		299,962			4.60	%		299,960			4.60	%
Senior unsecured notes due 2026 ⁽⁴⁾		617,692			5.95	%		617,473			5.95	%
Total fixed-rate debt		2,601,849			5.31	%		2,695,888			5.35	%
Variable-rate debt:
Recourse loan on operating Property		41,500			4.23	%		41,950			4.34	%
Construction loan		29,400			4.42	%		29,400			4.60	%
Secured line of credit		675,925			3.83	%		310,925			3.94	%
Secured term loan		456,250			3.83	%		465,000			3.94	%
Total variable-rate debt		1,203,075			3.86	%		847,275			3.98	%
Total fixed-rate and variable-rate debt		3,804,924			4.85	%		3,543,163			5.02	%
Unamortized deferred financing costs		( 15,232	)					( 16,148	)
Total mortgage and other indebtedness, net	$	3,789,692					$	3,527,015

(1)	Weighted-average interest rate includes the effect of debt premiums and discounts, but excludes amortization of deferred financing costs.

(2)	The balance is net of an unamortized discount of $1,984 and $2,106 as of March 31, 2020 and December 31, 2019, respectively.

(3)	The balance is net of an unamortized discount of $38 and $40 as of March 31, 2020 and December 31, 2019, respectively.

(4)	The balance is net of an unamortized discount of $7,308 and $7,527 as of March 31, 2020 and December 31, 2019, respectively.

Non-recourse term loans, recourse term loans, the secured line of credit and the secured term loan include loans that are secured by Properties owned by the Company that have a net carrying value of $2,422,116 at March 31, 2020.

Senior Unsecured Notes

Description	Issued ⁽¹⁾	Amount		Interest Rate			Maturity Date ⁽²⁾
2023 Notes	November 2013	$	450,000		5.25	%	December 2023
2024 Notes	October 2014		300,000		4.60	%	October 2024
2026 Notes	December 2016 / September 2017		625,000		5.95	%	December 2026

(1)	Issued by the Operating Partnership. CBL is a limited guarantor of the Operating Partnership's obligations under the Notes as described above.

( 2 )

The Notes are redeemable at the Operating Partnership's election, in whole or in part from time to time, on not less than 30 days and not more than 60 days' notice to the holders of the Notes to be redeemed. The 2026 Notes, the 2024 Notes and the 2023 Notes may be redeemed prior to September 15, 2026, July 15, 2024, and September 1, 2023, respectively, for cash at a redemption price equal to the aggregate principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but not including, the redemption date and a make-whole premium calculated in accordance with the indenture. On or after the respective dates noted above, the Notes are redeemable for cash at a redemption price equal to the aggregate principal amount of the Notes to be redeemed plus accrued and unpaid interest. If redeemed prior to the respective dates noted above, each issuance of Notes is redeemable at the treasury rate plus 0.50%, 0.35% and 0.40% for the 2026 Notes, the 2024 Notes and the 2023 Notes, respectively.

See Note 15 – Subsequent Events for information regarding the Company’s election to not make the interest payment related to the 2023 Notes that was due and payable on June 1, 2020.

Senior Secured Credit Facility

The Company has a $1,185,000 senior secured credit facility, which includes a revolving line of credit with a borrowing capacity of $685,000 and a term loan with an outstanding balance of $456,250 at March 31, 2020. The facility matures in July 2023 and bears interest at a variable rate of LIBOR plus 2.25%. The facility had an interest rate of 3.83% at March 31, 2020. The Operating Partnership is required to pay an annual facility fee, to be paid quarterly, which ranges from 0.25% to 0.35%, based on the unused capacity of the line of credit. The principal balance on the term loan will be reduced by $35,000 per year in quarterly installments. At March 31, 2020, the secured line of credit had an outstanding balance of $675,925. In March 2020, the Company drew $280,000 on its secured credit facility to increase liquidity and preserve financial flexibility in light of the uncertainty surrounding the impact of COVID-19.

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.” The terms of the Notes provide that, 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 into a guarantee agreement with the issuer of the Notes to satisfy the guaranty requirement.

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 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 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 condensed combined financial statements and notes are presented as an exhibit to this quarterly report on Form 10-Q for ease of reference.

Financial Covenants and Restrictions

The agreements for the Notes and senior secured credit facility contain default provisions customary for transactions of this nature (with applicable customary grace periods). Additionally, any default in the payment of any recourse indebtedness greater than or equal to $50,000 of the Operating Partnership will constitute an event of default under the Notes and the senior secured credit facility. Additionally, the senior secured credit facility contains a provision that any default on a payment of non-recourse indebtedness in excess of $150,000 is also a default of the senior 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 will not have more than $100,000 of cash on hand that constitutes borrowings on the secured line of credit. The Company has also determined that it is probable that it will fail to meet the minimum debt yield covenant under the senior secured credit facility in 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 in the senior secured credit facility agreement, of the 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 each covenant provides the lenders with the option to accelerate the maturity of the secured credit facility.

See Liquidity and Going Concern Considerations in Note 1 – Organization and Basis of Presentation and Note 15 – Subsequent Events for additional information.

Mortgages on Operating Properties

2020 Loan Repayments

Date

Property

Interest

Rate at

Repayment Date

Scheduled

Maturity Date

Principal

Balance

Repaid ⁽¹⁾

February

Parkway Place

6.50%

July 2020

33,186

February

Valley View Mall

6.50%

July 2020

51,360

84,546

(1)	The Company retired the loans with borrowings from its secured line of credit.

Scheduled Principal Payments

As of March 31, 2020, the scheduled principal amortization and balloon payments of the Company’s consolidated debt, excluding extensions available at the Company’s option, on all mortgage and other indebtedness, including construction loans and the secured line of credit, are as follows:

2020 ⁽¹⁾	$	118,560
2021		557,328
2022		465,455
2023		1,491,825
2024		341,398
2025		36,105
Thereafter		711,636
		3,722,307
Net unamortized discounts and premium		( 9,330	)
Unamortized deferred financing costs		( 15,232	)
Principal balance of loan secured by Lender Malls in default ⁽²⁾		91,947
Total mortgage and other indebtedness, net	$	3,789,692

(1 )	Reflects payments for the fiscal period April 1, 2020 through December 31, 2020.

( 2 )

Represents the aggregate principal balance as of March 31, 2020 of two non-recourse loans, secured by Greenbrier Mall and Hickory Point Mall, which were in default. The loans secured by Greenbrier Mall and Hickory Point Mall matured in December 2019.

Of the $118,560 of scheduled principal payments in 2020, $64,233 relates to the maturing principal balance of one operating property loan.

The Company’s mortgage and other indebtedness had a weighted-average maturity of 3.5 years as of March 31, 2020 and 3.7 years as of December 31, 2019.