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Chapter 11 Cases and Ability to Continue as a Going Concern | 6 Months Ended
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Jun. 30, 2021
Chapter Eleven Cases And Ability To Continue As Going Concern [Abstract] |
Chapter 11 Cases and Ability to Continue as a Going Concern | Note 2 - Chapter 11 Cases and Ability to Continue as a Going Concern Voluntary Reorganization under Chapter 11 On August 18, 2020, the Company entered into a Restructuring Support Agreement, (the “Original RSA”) with certain beneficial owners and/or investment advisors or managers of discretionary funds, accounts or other entities for the holders of beneficial owners (the “Consenting Noteholders”) representing in excess of 62%, including joining noteholders pursuant to joinder agreements, of the aggregate principal amount of the $450,000 of senior unsecured notes issued by the Operating Partnership in November 2013 that bear interest at 5.25% and mature on December 1, 2023 (the “2023 Notes”), the $300,000 of senior unsecured notes issued by the Operating Partnership in October 2014 that bear interest at 4.60% and mature on October 15, 2024 (the “2024 Notes”) and the $625,000 of senior unsecured notes issued by the Operating Partnership in December 2016 and September 2017 that bear interest at 5.95% and mature on December 15, 2026 (the “2026 Notes” and, collectively with the 2023 Notes and 2024 Notes, the "Notes"). On October 28, 2020, the Operating Partnership was notified by the administrative agent and lenders that they elected to exercise their rights pursuant to the terms of the secured credit facility to (i) require that rents payable by tenants at the properties that are collateral to the secured credit facility be paid directly to the administrative agent and (ii) exercise all voting rights and other ownership rights in respect of all the equity interests in the subsidiaries of the Operating Partnership that are guarantors of the secured credit facility. Beginning on November 1, 2020 (the “Commencement Date”), CBL and the Operating Partnership, together with certain of its direct and indirect subsidiaries (collectively, the “Debtors”), filed voluntary petitions (the “Chapter 11 Cases”) under chapter 11 of title 11 (“Chapter 11”) of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”). The Debtors are authorized to continue to operate their businesses and manage their properties as debtors-in-possession pursuant to the Bankruptcy Code. The Debtors’ Chapter 11 Cases are being jointly administered for procedural purposes only under the caption In re CBL & Associates Properties, Inc., et al., Case No. 20-35226. The filing of the Chapter 11 Cases constituted an event of default that results in the automatic acceleration of certain monetary obligations to be immediately due and payable with respect to the secured credit facility and the senior unsecured notes. On November 2, 2020, the Company filed an adversary proceeding in the Bankruptcy Court seeking among other things, a temporary restraining order (the “Order”) and for a preliminary injunction to enjoin, pending a determination of the parties’ rights, the administrative agent or any of its officers, agents, servants, attorneys and successors from taking any action to exercise any and all remedies under the terms of the secured credit facility or other agreements as a result of the events of default asserted by the administrative agent, or any other right or remedy that would otherwise accompany the occurrence of an event of default, including without limitation, any rights of acceleration under the terms of the secured credit facility, rights flowing from the notice of acceleration, rights exercised pursuant to the Notice of Exercise or any other rights or remedies properly exercisable solely upon an actual or determined event of default. On November 2, 2020, the Bankruptcy Court granted the Order, and the Bankruptcy Court took up the other pending claims during the adversarial proceeding, which has now been stayed pending the confirmation of the Company’s plan, discussed below. Following the Commencement Date, the Bankruptcy Court entered certain interim and final orders facilitating the Debtors’ operational transition into Chapter 11. These orders authorized the Debtors to, among other things, pay certain prepetition employee expenses and benefits, use their existing cash management system, maintain and administer customer programs, pay certain critical service providers, honor insurance-related obligations, and pay certain prepetition taxes and related fees on a final basis. After engaging in negotiations in a Bankruptcy Court-ordered mediation, on March 21, 2021 (the “Agreement Effective Date”), the Company entered into the First Amended and Restated Restructuring Support Agreement (the “Amended RSA”), with the Consenting Noteholders in excess of 69% (including joinders) of the aggregate principal amount of the Notes and certain lenders party to the Company’s secured credit facility who hold in the aggregate in excess of 96% (including joinders) of the aggregate outstanding principal amount of debt under the secured credit facility (the “Consenting Bank Lenders” and together with the Consenting Noteholders, the “Consenting Stakeholders”). The Amended RSA amends and restates the Original RSA and sets forth, subject to certain conditions, the commitments to and obligations of, on the one hand, the Company, and on the other hand, the Consenting Noteholders and Consenting Bank Lenders, in connection with the restructuring transactions (the “Restructuring Transactions”) set forth in the Amended RSA and the plan term sheet attached as Exhibit B to the Amended RSA (the “Plan Term Sheet”). The Amended RSA contemplates that the restructuring and recapitalization of the Debtors will occur through a joint plan of reorganization in the Chapter 11 Cases. As required by the Amended RSA, (i) on April 15, 2021, the Company filed an amended Chapter 11 plan of reorganization and accompanying disclosure statement with the Bankruptcy Court; (ii) on May 18, 2021, the Company filed the second amended Chapter 11 plan of reorganization and accompanying disclosure statement, as further amended on May 19, 2021; and (iii) on May 25, 2021, the Company filed the third amended Chapter 11 plan of reorganization and, on August 9, 2021, filed technical modifications thereto (the “Plan”) and accompanying disclosure statement (the “Disclosure Statement”), to implement the restructuring transactions. In addition, on May 26, 2021, the Bankruptcy Court entered an order that among other things, approved the Company’s Disclosure Statement and established dates and deadlines related to solicitation of, voting on, and confirmation of the Plan. The Amended RSA provides that the ongoing litigation between the Company and the lenders of the Company’s secured credit facility (the “Bank Lenders”) arising from the prepetition enforcement actions taken by the Bank Lenders is stayed and is to be dismissed upon the order confirming the Plan becoming a “Final Order” (as defined in the Plan). On August 11, 2021, following the confirmation hearing, the Bankruptcy Court entered an order confirming the Plan. Pursuant to the Amended RSA, the Company is required to have the Plan become effective no later than November 1, 2021. The Company cannot predict the ultimate outcome of its Chapter 11 Cases at this time. For the duration of the Company’s Chapter 11 proceedings, the Company’s operations and ability to develop and execute its business plan are subject to the risks and uncertainties associated with the Chapter 11 process. As a result of these risks and uncertainties, the amount and composition of the Company’s assets, liabilities, officers and/or directors could be significantly different following the outcome of the Chapter 11 proceedings, and the description of the Company’s operations, properties and liquidity and capital resources included in this quarterly report may not accurately reflect its operations, properties and liquidity and capital resources following the Chapter 11 process. Once effective, the Plan provides for the elimination of more than $1,681,900 of debt and preferred obligations, including an aggregate cash payment of $195,000 as noted below, as well as a significant reduction in interest expense. In exchange for their approximately $1,375,000 in principal amount of senior unsecured notes and $133,000 in principal amount of the secured credit facility, Consenting Noteholders, other noteholders, and certain holders of unsecured claims against the Company will receive, in the aggregate, $95,000 in cash, $555,000 of new senior secured notes, of which up to $100,000, upon election by the Consenting Noteholders, may be received in the form of new convertible secured notes and 89% in common equity of the newly reorganized company (subject to dilution, as set forth in the Plan). Certain Consenting Noteholders will also provide up to $50,000 of new money in exchange for additional convertible secured notes. The transactions outlined in the Plan will be implemented in the Chapter 11 Cases. The Plan provides that the remaining Bank Lenders, holding $983,700 in principal amount under the secured credit facility, will receive $100,000 in cash and a new $883,700 secured term loan. Existing common and preferred shareholders are expected to receive up to 11% of common equity in the newly reorganized company. In particular, subject to certain exceptions, under the Bankruptcy Code, the Debtors may assume, assume and assign or reject executory contracts and unexpired leases subject to the approval of the Bankruptcy Court and certain other conditions. Generally, the rejection of an executory contract or unexpired lease is treated as a prepetition breach of such executory contract or unexpired lease and, subject to certain exceptions, relieves the Debtors of performing their future obligations under such executory contract or unexpired lease but entitles the contract counterparty or lessor to a prepetition general unsecured claim for damages caused by such deemed breach subject, in the case of the rejection of unexpired leases of real property, to certain caps on damages. Counterparties to such rejected contracts or leases may assert unsecured claims in the Bankruptcy Court against the applicable Debtor’s estate for such damages. Generally, the assumption or assumption and assignment of an executory contract or unexpired lease requires the Debtors to cure existing monetary defaults under such executory contract or unexpired lease and provide adequate assurance of future performance thereunder. Accordingly, any description of an executory contract or unexpired lease with the Debtors in this quarterly report, including where applicable a quantification of the Company’s obligations under any such executory contract or unexpired lease with the Debtors is qualified by any overriding rights the Company has under the Bankruptcy Code. Further, nothing herein is or shall be deemed an admission with respect to any claim amounts or calculations arising from the assumption, assumption and assignment or rejection of any executory contract or unexpired lease and the Debtors expressly preserve all of their rights with respect thereto. 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, as well as the status of the Chapter 11 Cases. The filing of the Chapter 11 Cases by the Debtors constituted an event of default that results in the automatic acceleration of certain monetary obligations to be immediately due and payable with respect to the secured credit facility and the senior unsecured notes. The filing of the Chapter 11 Cases also constituted an event of default with respect to certain property-level debt of the Operating Partnership’s subsidiaries, which may result in acceleration of the outstanding principal and other sums due. See Note 8 and Note 9 for further discussion. Given the acceleration of the secured credit facility, the senior unsecured notes and certain property-level debt, as well as the inherent risks, unknown results and inherent uncertainties associated with the bankruptcy process and the direct correlation between these matters and the Company’s ability to satisfy its financial obligations that may arise, 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 Company’s ability to continue as a going concern is contingent upon its ability to successfully implement the Plan. 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. Delisting of Common Stock and Depositary Shares On November 2, 2020, the NYSE announced that (i) it had suspended trading in the Company’s stock and (ii) it had determined to commence proceedings to delist the Company’s common stock, as well as the depositary shares each representing a 1/10th fractional share of the Company’s 7.375% Series D Cumulative Redeemable Preferred Stock (“Series D Preferred Stock”) and the depositary shares each representing a 1/10th fractional share of the Company’s 6.625% Series E Cumulative Redeemable Preferred Stock (“Series E Preferred Stock”), due to such securities no longer being suitable for listing based on “abnormally low” trading price levels, pursuant to Section 802.01D of the NYSE Listed Company Manual. The Company has appealed this decision in accordance with NYSE rules, and the appeal is still in process. In the meantime, effective November 3, 2020, the Company’s common stock and the depositary shares representing fractional interests in its Series D Preferred Stock and Series E Preferred Stock began trading on the OTC Markets, operated by the OTC Markets Group, Inc., under the symbols “CBLAQ”, “CBLDQ” and “CBLEQ”, respectively. 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. Reorganization Items Any expenses, gains and losses that are realized or incurred as of or subsequent to November 1, 2020, the Commencement Date, and as a direct result of the Chapter 11 Cases, are recorded in the line item “Reorganization items” in the Company’s condensed consolidated statements of operations. For the three months ended June 30, 2021, the $17,073 of reorganization items consists of $15,480 in professional fees, $1,072 in compensation associated with reorganization efforts and $521 of U.S. Trustee fees. For the six months ended June 30, 2021, the $40,006 of reorganization items consists of $37,709 in professional fees, $1,072 in compensation associated with reorganization efforts and $1,225 of U.S. Trustee fees. Liabilities Subject to Compromise As of June 30, 2021 and December 31, 2020, the Company has reclassified $2,591,706 and $2,551,490, respectively, to the line item “Liabilities subject to compromise” in the Company’s condensed consolidated balance sheets. These liabilities are reported at the amounts expected to be allowed as claims by the Bankruptcy Court, although they may be settled for less. As of June 30, 2021, the liabilities subject to compromise consisted of $1,375,000 related to the senior unsecured notes, $675,926 related to the secured line of credit, $438,750 related to the secured term loan, $57,644 in unpaid accrued interest as of the Commencement Date, $39,462 related to the loan secured by The Outlet Shoppes at Laredo, $726 of unpaid accrued interest related to the loan secured by The Outlet Shoppes at Laredo as of May 26, 2021 and $4,198 of prepetition unsecured or under secured liabilities. As of December 31, 2020, the liabilities subject to compromise consisted of $1,375,000 related to the senior unsecured notes, $675,926 related to the secured line of credit, $438,750 related to the secured term loan, $57,644 in unpaid accrued interest as of the Commencement Date and $4,170 of prepetition unsecured or under secured liabilities. The contractual interest expense on the loan secured by The Outlet Shoppes at Laredo, the senior unsecured notes and secured credit facility is in excess of recorded interest expense by $45,279 and $90,043 for the three and six months ended June 30, 2021, respectively. This excess contractual interest expense is not included as interest expense in the condensed consolidated statements of operations for the three and six months ended June 30, 2021 because the Company discontinued accruing interest on the loan secured by The Outlet Shoppes at Laredo as of May 26, 2021, and the senior unsecured notes and the secured credit facility subsequent to the Commencement Date in accordance with ASC 852, which limits the recognition of interest expense during a bankruptcy proceeding to only amounts that will be paid during the bankruptcy proceeding or that are probable of becoming allowed claims. The Company has not made any interest payments on its senior unsecured notes or its secured credit facility since the Chapter 11 Cases commenced on November 1, 2020 and did not make any interest payments on the loan secured by The Outlet Shoppes at Laredo subsequent to its petition date on May 26, 2021. Condensed combined financial statement information of the Debtors is as follows: Condensed Combined Financial Statements – Debtors (Debtors-In-Possession) Condensed Combined Balance Sheets
|  | June 30, 2021 |  |  | December 31, 2020 |
ASSETS: |  |  |  |  |  |  |  |
Investment in real estate assets |  | $ | 4,000,429 |  |  | $ | 4,056,257 |
Accumulated depreciation |  |  | (1,557,473 | ) |  |  | (1,544,800 | )
|  |  | 2,442,956 |  |  |  | 2,511,457 |
Developments in progress |  |  | 14,215 |  |  |  | 27,853 |
Net investment in real estate assets |  |  | 2,457,171 |  |  |  | 2,539,310 |
Available-for-sale securities - at fair value (amortized cost of $183,496 and $233,053 as of June 30, 2021 and December 31, 2020, respectively) |  |  | 183,490 |  |  |  | 233,071 |
Cash and cash equivalents |  |  | 131,713 |  |  |  | 46,346 |
Restricted cash |  |  | 88,810 |  |  |  | 29,834 |
Intercompany due from non-debtor entities |  |  | 76,365 |  |  |  | 76,095 |
Intangible lease assets and other assets |  |  | 126,035 |  |  |  | 140,241 |
Total assets |  | $ | 3,063,584 |  |  | $ | 3,064,897 |
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY: |  |  |  |  |  |  |  |
Other liabilities |  | $ | 113,173 |  |  | $ | 102,910 |
Intercompany due to non-debtor entities |  |  | 5,771 |  |  |  | 5,062 |
Total liabilities not subject to compromise |  |  | 118,944 |  |  |  | 107,972 |
Liabilities subject to compromise |  |  | 2,591,706 |  |  |  | 2,551,490 |
Shareholders' equity and noncontrolling interests of the Debtors |  |  | 352,934 |  |  |  | 405,435 |
Total liabilities and equity |  | $ | 3,063,584 |  |  | $ | 3,064,897 |
Condensed Combined Statements of Operations
|  | Three Months Ended June 30, 2021 |  |  | Six Months Ended June 30, 2021 |
Total revenues |  | $ | 90,191 |  |  | $ | 178,664 |
Depreciation and amortization |  |  | (34,228 | ) |  |  | (68,382 | )
Loss on impairment |  |  | — |  |  |  | (57,182 | )
Expenses |  |  | (41,448 | ) |  |  | (86,839 | )
Interest and other income |  |  | 1,568 |  |  |  | 3,356 |
Interest expense (unrecognized contractual interest expense was $45,279 and $90,043 for the three and six months ended June 30, 2021, respectively) |  |  | (395 | ) |  |  | (1,027 | )
Reorganization items |  |  | (17,073 | ) |  |  | (40,006 | )
Gain (loss) on sales of real estate assets |  |  | 107 |  |  |  | (192 | )
Income tax provision |  |  | (705 | ) |  |  | (1,456 | )
Net loss |  | $ | (1,983 | ) |  | $ | (73,064 | )
Condensed Combined Statements of Cash Flows
CASH FLOWS FROM OPERATING ACTIVITIES: |  | Six Months Ended June 30, 2021 |
Net loss |  | $ | (73,064 | )
Adjustments to reconcile net loss to net cash provided by operating activities: |  |  |  |
Loss on impairment |  |  | 57,182 |
Other assets and liabilities, net |  |  | 96,277 |
Net cash provided by operating activities |  |  | 80,395 |
CASH FLOWS FROM INVESTING ACTIVITIES: |  |  |  |
Purchases of available-for-sale securities |  |  | (319,887 | )
Redemptions of available-for-sale securities |  |  | 368,380 |
Changes in other assets |  |  | (5,437 | )
Net cash provided by investing activities |  |  | 43,056 |
CASH FLOWS FROM FINANCING ACTIVITIES: |  |  |  |
Net distributions from non-Debtor subsidiaries |  |  | 20,845 |
Other financing activities |  |  | 47 |
Net cash provided by financing activities |  |  | 20,892 |
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH |  |  | 144,343 |
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period |  |  | 76,180 |
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period |  | $ | 220,523 |
Reconciliation from condensed combined statement of cash flows to condensed combined balance sheet: |  |  |  |
Cash and cash equivalents |  | $ | 131,713 |
Restricted cash |  |  | 88,810 |
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period |  | $ | 220,523 |
SUPPLEMENTAL INFORMATION |  |  |  |
Cash paid for reorganization items |  | $ | 35,602 |

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- Definition The entire disclosure for the description and amounts of reorganization under Chapter 11 of the US Bankruptcy Code. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 852 -URI http://asc.fasb.org/topic&trid=2209115 + Details
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