Washington Prime Group, a major mall owner of more than 100 locations across the United States, filed for bankruptcy, citing pandemic-related shutdowns.
The Columbus, Ohio-based company filed for Chapter 11 late Sunday, saying Covid-19 "created significant challenges" and that the move is "necessary." Washington Prime secured $100 million in new funding to support its day-to-day operations so it can "continue in the ordinary course without interruption."
"The company's financial restructuring will enable Washington Prime to right size its balance sheet and position the company for success going forward," said CEO Lou Conforti. "During the financial restructuring, we will continue to work toward maximizing the value of our assets and our operating infrastructure."
Shares of Washington Prime (WPG) plunged as much as 55% in early trading. The stock is down 60% for the year.
Temporary closures and relaxation of rent to some of its tenants were the causes of the bankruptcy. Washington Prime, which warned this move was coming in recent regulatory filings, said it's using Chapter 11 to "implement a comprehensive and consensual financial restructuring" to deleverage its nearly $1 billion in debt.
Shifting consumer habits and the pandemic rattled the retail industry over the past year. Two other mall owners, CBL Properties (CBLPRD) and PREIT (PEI), both filed for bankruptcy last year and cited similar problems. All three mall owners were hurt by some major tenants also filing for bankruptcy.
"The bankruptcy shows that while things are now getting back to normal, many of the scars left by the pandemic have not fully healed," said Neil Saunders, retail analyst and managing director at GlobalData.
"Strong balance sheets and sound operations are needed to see property companies through this period," he added. "Washington Prime did not have those fundamentals and so has chosen Chapter 11 as a way to restructure and pay down its debts."
The pandemic sped up the shift to online shopping, and the continued growth of e-commerce sales will lead to more stores shutting down after the pandemic ends, UBS retail analysts predicted in a recent report. The report estimates that around 80,000 stores will close over the next five years. They also believe the number of US malls will also decline over the same period.
"While the trajectory for retail is far from terrible, malls are under increasing pressure from higher vacancy rates and tenants being more demanding over rent," said Saunders.