Mortgage and Other Indebtedness, Net

6 Months Ended

Jun. 30, 2023

Note 8 – Mortgage and Other Indebtedness, Net

CBL has no indebtedness. Either the Operating Partnership or one of its consolidated subsidiaries that it has a direct or indirect ownership interest in are the borrowers on all the Company's debt.

CBL is a limited guarantor of the secured term loan for losses suffered solely by reason of fraud or willful misrepresentation by the Operating Partnership or its affiliates.

The Company’s mortgage and other indebtedness, net, consisted of the following:


	June 30, 2023						December 31, 2022
	Amount			Weighted- Average Interest Rate (1)			Amount			Weighted- Average Interest Rate (1)
Fixed-rate debt:
Open-air centers and outparcels loan (2)	$	180,000			6.95	%	$	180,000			6.95	%
Non-recourse loans on operating properties		783,501			5.29	%		843,634			4.90	%
Total fixed-rate debt		963,501			5.60	%		1,023,634			5.26	%
Variable-rate debt:
Secured term loan (3)		813,038			7.92	%		829,452			6.87	%
Open-air centers and outparcels loan (2)		180,000			9.26	%		180,000			8.22	%
Non-recourse loans on operating properties		55,440			8.30	%		56,490			7.26	%
Total variable-rate debt		1,048,478			8.17	%		1,065,942			7.12	%
Total fixed-rate and variable-rate debt		2,011,979			6.94	%		2,089,576			6.21	%
Unamortized deferred financing costs		(15,407	)					(17,101	)
Debt discounts (4)		(54,523	)					(72,289	)
Total mortgage and other indebtedness, net	$	1,942,049					$	2,000,186

(1)

Weighted-average interest rate excludes amortization of deferred financing costs.

(2)

The Operating Partnership has an interest rate swap on a notional amount of $32,000 related to the variable portion of the loan to effectively fix the interest rate at 7.3975%.

(3)

The Operating Partnership provided a limited guaranty up to a maximum of $175,000 (the “Principal Liability Cap”). The Principal Liability Cap will be reduced by an amount equal to 100% of the first $2,500 in principal amortization made by HoldCo I each calendar year and will be reduced further by 50% of the principal amortization payments made by HoldCo I each calendar year in excess of the first $2,500 in principal amortization for such calendar year. As of June 30, 2023, the Principal Liability Cap had been reduced to $127,390. The Principal Liability Cap is eliminated when the loan balance is reduced below $650,000, or if at any time after November 1, 2023, the debt yield ratio is greater than 15.0%.

(4)

In conjunction with fresh start accounting, the Company estimated the fair value of its mortgage notes with the assistance of a third-party valuation advisor. This resulted in recognizing debt discounts upon emerging from bankruptcy. The debt discounts are accreted over the term of the respective debt using the effective interest method. The remaining debt discounts at June 30, 2023 will be accreted over a weighted average period of 2.6 years.

Non-recourse loans on operating properties, the open-air centers and outparcels loan and the secured term loan include loans that are secured by properties owned by the Company that have a carrying value of $1,530,211 at June 30, 2023.

2023 Loan Activity

In February 2023, the Company exercised its first option to extend the loan secured by Fayette Mall through May 2024. The interest rate remains fixed at 4.25%.

In March 2023, the secured term loan was amended to replace LIBOR with the secured overnight financing rate ("SOFR") for purposes of calculating interest. The transition to SOFR is effective as of June 30, 2023. As of the conversion date, the interest rate is SOFR plus the applicable margin (2.75%) plus the SOFR adjustment (0.11448%).

In April 2023, the Company exercised its extension option on the loan secured by The Outlet Shoppes at Laredo for an extended maturity date of June 2024.

In May 2023, the Operating Partnership entered into an interest rate swap with a notional amount of $32,000 to fix the interest rate at 7.3975% on $32,000 of the variable rate portion of the open-air centers and outparcels loan. The swap has a maturity date of June 7, 2027. The Company designated the swap as a cash flow hedge on its variable rate debt.

In June 2023, the loan secured by Cross Creek Mall was modified for an extended maturity date of June 2025. The interest rate is fixed at 8.19%.

Scheduled Principal Payments

As of June 30, 2023, 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, are as follows:


2023 (1)	$	39,522
2024		237,646
2025		908,717
2026		373,682
2027		360,896
2028		950
Thereafter		61,905
Total		1,983,318
Principal balance of a loan with a maturity date prior to June 30, 2023 (2)		28,661
Total mortgage and other indebtedness	$	2,011,979

(1)

Reflects scheduled principal amortization and balloon payments for the fiscal period July 1, 2023 through December 31, 2023.

(2)

Represents the principal balance as of June 30, 2023 of the loan secured by WestGate Mall, which is in maturity default. The Company is in discussions with the lender. The loan matured in July 2022 and had a balance of $28,661 as of June 30, 2023.

Of the $39,522 of scheduled principal payments for the remainder of 2023, $17,790 relates to the maturing principal balance of one operating property loan.

Interest Rate Hedge Instruments

The Company may use derivative financial instruments, including interest rate swaps, caps, options, floors and other interest rate derivative contracts, to hedge all or a portion of the interest rate risk associated with its borrowings. The principal objective of such arrangements is to minimize the risks and/or costs associated with the Company’s operating and financial structure as well as to hedge specific anticipated transactions. The Company does not intend to utilize derivatives for speculative or other purposes other than interest rate risk management. The use of derivative financial instruments carries certain risks, including the risk that the counterparties to these contractual arrangements are not able to perform under the agreements. To mitigate this risk, the Company only enters into derivative financial instruments with counterparties with high credit ratings and with major financial institutions with which the Company and its affiliates may also have other financial relationships. The Company does not anticipate that its counterparty will fail to meet their obligation.

The Company records its derivative instruments in its condensed consolidated balance sheets at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the derivative has been designated as a hedge and, if so, whether the hedge has met the criteria necessary to apply hedge accounting.

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

The effective portion of changes in the fair value of derivatives designated as, and that qualify as, cash flow hedges is recorded in accumulated other comprehensive income (loss) and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. Such derivatives were used to hedge the variable cash flows associated with variable-rate debt.

Instrument Type

Location in the Condensed Consolidated Balance Sheet

Notional

Index

Fair Value at June 30, 2023

Maturity Date

Pay fixed/Receive variable swap

Intangible lease assets and other assets

32,000

1-month USD-SOFR CME

880

Jun-27


	Gain Recognized in Other Comprehensive Income (Loss)					Gain Recognized in Earnings
	Three Months Ended June 30,					Three Months Ended June 30,
Hedging Instrument	2023		2022		Location of Gain Reclassified from Accumulated Other Comprehensive Income (Loss) into Earnings	2023		2022
Interest rate swap	$	880	$	—	Interest Expense	$	95	$	—


	Gain Recognized in Other Comprehensive Income (Loss)					Gain Recognized in Earnings
	Six Months Ended June 30,					Six Months Ended June 30,
Hedging Instrument	2023		2022		Location of Gain Reclassified from Accumulated Other Comprehensive Income (Loss) into Earnings	2023		2022
Interest rate swap	$	880	$	—	Interest Expense	$	95	$	—

Amounts reported in accumulated other comprehensive income (loss) related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. During the next twelve months, the Company estimates that $600 will be reclassified from other comprehensive income (loss) as a decrease to interest expense.

The Company has an agreement with each derivative counterparty that contains a provision where if the Company either defaults or is capable of being declared in default on any of its indebtedness, then the Company could also be declared in default on its derivative obligations.

As of June 30, 2023, the Company did not have any derivatives with a fair value in a net liability position including accrued interest but excluding any adjustment for nonperformance risk. As of June 30, 2023, the Company has posted $1,920 of cash collateral related to the interest rate swap. The Company is not in breach of any agreement provisions.