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Item 1.01
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Entry in to a Material Agreement
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Restructuring Support Agreement
On June 11, 2021, Washington Prime Group Inc. (the “Company”) and Washington Prime Group, L.P., the operating partnership of the Company (“WPG L.P.”), and certain of their direct and indirect subsidiaries (collectively, the “Company Parties”), entered into a Restructuring Support Agreement (the “Restructuring Support Agreement”) with certain creditors (the “Consenting Stakeholders”). Capitalized terms not otherwise defined in this “Restructuring Support Agreement” section of this Current Report on Form 8-K have the meanings given to them in the Restructuring Support Agreement and any attachments thereto.
As of the Agreement Effective Date (as defined in the Restructuring Support Agreement), the Consenting Stakeholders hold at least 74.5% of the aggregate principal amount of the 2018 Credit Facility Claims, at least 62.0% of the aggregate principal amount of the 2015 Credit Facility Claims, 100% of the aggregate principal amount of the Weberstown Term Loan Facility Claims, and at least 66.67% of the aggregate principal amount of the Unsecured Note Claims. Under the Restructuring Support Agreement, the Consenting Stakeholders have agreed, subject to certain terms and conditions, to support a financial restructuring (the “Restructuring”) of the existing corporate debt of, existing equity interests in, and certain other obligations of the Company Parties, pursuant to the chapter 11 plan of reorganization (the “Plan”) to be filed in cases commenced under chapter 11 (the “Chapter 11 Cases”) of title 11 of the United States Code (the “Bankruptcy Code”). The Plan will be implemented in accordance with the restructuring term sheet attached to, and incorporated into, the Restructuring Support Agreement (the “Term Sheet”) (such transactions described in, and in accordance with the Restructuring Support Agreement and the Term Sheet, the “Restructuring Transactions”).
Pursuant to the Restructuring Support Agreement and Plan, the Company Parties have a right to “toggle” between either an equitization plan or an alternative value-maximizing transaction that would repay, in full in cash, all of the Company's corporation-level debt, depending on the results of the Company's 60-day postpetition continuation of its prepetition marketing process. The baseline restructuring transaction, tied to certain milestones in the Restructuring Support Agreement, is the Equitization Restructuring that provides for the treatment for each class of Claims and Interests as follows:
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Revolving and Term Loan Facility Claims. Each holder of Revolving and Term Loan Facilities Claims shall receive its pro rata share of (i) New Term Loan Exit Facility Loans in an aggregate principal amount of $1.187 billion plus, at the election of the Plan Sponsor, certain prepetition and postpetition interest and (ii) $150 million cash plus cash in the amount of any accrued and unpaid (a) adequate protection payments and (b) prepetition and postpetition interest;
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Weberstown Term Loan Facility Claims. Each holder of Weberstown Term Loan Facility Claims shall receive its pro rata share of (i) New Term Loan Exit Facility Loans in an aggregate principal amount of $25 million plus, at the election of the Plan Sponsor, certain prepetition and postpetition interest and (ii) $40 million cash plus cash in the amount of any accrued and unpaid (a) adequate protection payments and (b) prepetition and postpetition interest;
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Secured Property-Level Debt and Guarantee Claims. To the extent that any Secured Property-Level Debt and Guarantee Claims exist, such Secured Property-Level Mortgage Claims shall be reinstated, unimpaired, or receive treatment reasonably acceptable to the Plan Sponsor;
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Unsecured Notes Claims. Each holder of Unsecured Notes Claims shall receive its pro rata share of (i) 100% of the New Common Equity, less any New Common Equity distributed to Holders of Existing Equity Interests electing to receive New Common Equity, subject to dilution on account of the Management Incentive Plan, and the Equity Rights Offering and (ii) 100% of the Unsecured Noteholder Rights;
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General Unsecured Claims. Each holder of General Unsecured Claims shall, at the option of the applicable Company Party, (i) receive payment in full in cash or (ii) be reinstated;
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Existing Preferred Equity Interests. Subject to certain eligibility requirements and election rights set forth in the Plan, each holder of Existing Preferred Equity Interests shall receive: (i) if the class of Existing Preferred Equity Interests votes to accept the Plan, such holder’s pro rata share of the (A) Preferred Equity Cash Pool, which shall equal $20 million if the class of Existing Common Equity Interests votes to accept the Plan and $40 million otherwise or (B) such holder’s pro rata share of the Preferred Equity Equity Pool, which shall equal 3.0625% if the class of Existing Common Equity Interests votes to accept the Plan and 6.125% otherwise; or (ii) if the class of Existing Preferred Equity Interests votes to reject the Plan, each holder of Existing Preferred Equity Interests shall not receive any distribution on account of such Existing Preferred Equity Interests, which will be canceled, released, and extinguished as of the Agreement Effective Date, and will be of no further force or effect; and
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Existing Common Equity Interests. Subject to certain eligibility requirements and election rights set forth in the Plan, each holder of Existing Common Equity Interests shall receive: (i) if the class of Existing Preferred Equity Interests and the class of Common Equity Interests vote to accept the Plan, such holder’s pro rata share of (A) $20 million or (B) 3.0625% of New Common Equity; or (ii) if the class of Existing Preferred Equity Interests or Existing Common Equity Interests vote to reject the Plan, holders of Existing Common Equity Interests shall not receive any distribution on account of such Interests, which will be canceled, released, and extinguished as of the Agreement Effective Date, and will be of no further force or effect.
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As part of the Equitization Restructuring, the Company Parties will conduct an Equity Rights Offering available to Holders of the Unsecured Notes to raise up to $325 million in cash from the offer and sale of New Common Equity. The New Common Equity issued in the Equity Rights Offering will dilute the New Common Equity distributed to holders of Unsecured Notes Claims on account of such claims, and any portion of the Equity Rights Offering in excess of $260 million and New Common Equity issued on account of the management incentive plan will also dilute the New Common Equity distributed to Holders of Existing Equity Interests. The Equity Rights Offering will be backstopped fully by certain of the Consenting Stakeholders.
Pursuant to the Restructuring Support Agreement, Plan, and Bidding Procedures, the Company Parties will continue their prepetition marketing process on a postpetition basis to determine whether a value-maximizing alternative restructuring transaction is available, either in the form of a sale of the Company’s assets or a standalone recapitalization plan. If the Company Parties effectuate a Toggle Restructuring, the alternative transaction must provide for the payment in full in cash of the 2018 Credit Facility Claims, 2015 Credit Facility Claims, Weberstown Term Loan Facility Claims, Unsecured Notes (including pre- and postpetition default rate interest), the payment of the Backstop Base Premium contemplated in the Backstop Commitment Agreement, and a recovery for the Company’s existing equity interests in excess of what is provided for under the Equitization Restructuring.
The Restructuring Support Agreement contains various milestones, including the following: (a) no later than two (2) calendar days after the Petition Date, the Company Parties shall have filed the Plan and Disclosure Statement; (b) no later than five (5) calendar days after the Petition Date the Bankruptcy Court shall have entered the DIP Interim Order; (c) no later than 30 calendar days after the Petition Date, or such other date as agreed by the Plan Sponsor and the Company Parties, the Bankruptcy Court shall have entered the Backstop Approval Order; (f) no later than 45 calendar days after the Petition Date, the Bankruptcy Court shall have entered the DIP Final Order; no later than 60 calendar days after the Petition Date, the Bankruptcy Court shall have entered the Confirmation Order; provided that such milestone shall be extended to 74 calendar days in accordance with the procedures included in the Restructuring Support Agreement; and (g) no later than 15 calendar days after the entry of the Confirmation Order, the Plan Effective Date shall have occurred.
In accordance with the Restructuring Support Agreement, the Consenting Stakeholders agreed, among other things, to: (i) support the Restructuring Transactions as contemplated by the Restructuring Support Agreement and the definitive documents governing the Restructuring Transactions; (ii) not object to, delay or impede the acceptance, implementation, or consummation of the Restructuring Transactions in accordance with the Restructuring Support Agreement; (iii) vote and consent to accept the Plan; and (iv) except as permitted in the Restructuring Support Agreement, not transfer any ownership (including any beneficial ownership as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) held by each Consenting Stakeholder.
In accordance with the Restructuring Support Agreement, the Company Parties agreed, among other things, to: (i) support and take all steps necessary and desirable to consummate the Restructuring Transactions in accordance with the Restructuring Support Agreement; (ii) not take any action, that is inconsistent in any material respect with, or that would reasonably be expected to frustrate or impede approval, implementation and consummation of the Restructuring Transactions; (iii) to the extent any legal or structural impediment arises that would prevent, hinder, or delay the consummation of the Restructuring Transactions contemplated in the Restructuring Support Agreement or the Plan, (a) take all steps reasonably necessary and desirable to address any such impediment and (b) negotiate in good faith appropriate additional or alternative provisions to address any such impediment; (iv) use commercially reasonable efforts to obtain any and all required governmental, regulatory and/or third-party approvals for the Restructuring Transactions; (v) negotiate in good faith and execute and use commercially reasonable efforts to deliver the Definitive Documents (as defined in the Restructuring Support Agreement) and any other required agreements to effectuate and consummate the Restructuring Transactions as contemplated by the Restructuring Support Agreement; (vi) use commercially reasonable efforts to seek additional support for the Restructuring Transactions from other material stakeholders to the extent reasonably prudent; and (viii) actively oppose and object to the efforts of any person seeking to object to, delay, impede, or take any other action to interfere with the acceptance, implementation, or consummation of the Restructuring Transactions (including, if applicable, the timely filing of objections or written responses) to the extent such opposition or objection is reasonably necessary or desirable to facilitate implementation of the Restructuring Transactions.
The Restructuring Support Agreement may be terminated upon the occurrence of certain events set forth in the Definitive Documents, including the failure to meet specified milestones specified in the Restructuring Support Agreement.
The foregoing description is not complete and is qualified in its entirety by reference to the full text of the Restructuring Support Agreement, a copy of which is filed herewith as Exhibit 10.1 and is incorporated herein by reference.
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Item 1.03
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Bankruptcy or Receivership.
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Chapter 11 Filing
On June 13, 2021, the Company Parties voluntarily filed the Chapter 11 Cases in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”). The Company Parties filed a motion with the Bankruptcy Court seeking to jointly administer the Chapter 11 Cases under the caption “In re: Washington Prime Group Inc., et al.”
The Company Parties continue to operate their businesses and manage their properties as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. To ensure the Company Parties’ ability to continue operating in the ordinary course of business and minimize the effect of the Chapter 11 Cases on the Company Parties’ customers, vendors, tenants and employees, the Company Parties filed with the Bankruptcy Court motions seeking a variety of “first-day” relief, including authority to pay employee wages and benefits and to pay vendors and business partners for goods and services provided both before and after the filing date so that those who continue to work with the Company Parties on existing terms will be paid in full and in the ordinary course of business.
DIP Financing
The Company and certain lenders (the “DIP Parties”) have agreed to a non-amortizing multiple draw super-priority senior secured debtor-in-possession term loan facility (the “DIP Facility”) in an aggregate principal amount of $100 million.
The DIP Facility is expected to include conditions precedent, representations and warranties, affirmative and negative covenants and events of default customary for financings of this type and size. The proceeds of all or a portion of the proposed DIP Facility may be used for, among other things, general corporate purposes, including working capital, administrative costs, redevelopment costs, tenant obligations, expenses and fees of the transactions contemplated by the Chapter 11 Cases, for payment of court approved adequate protection obligations and other such purposes consistent with the proposed DIP Facility.
The foregoing description of the proposed DIP Facility does not purport to be complete and is qualified in its entirety by reference to the final DIP credit agreement, as may be approved by the Bankruptcy Court.