CBL & Associates Properties Inc. along with Wells Fargo, the indenture trustee under the company's first-lien credit agreement, an ad hoc group comprised of noteholders that are parties to the company's restructuring support agreement and the unsecured creditors' committee in the case have agreed to participate in mediation over whether the company is in default under its credit agreement, according to a court order.
The mediator will be Houston Bankruptcy Court Judge Marvin Isgur. According to an agreed-upon court order filed in the case by the parties on Jan. 4 and approved by the bankruptcy court on Jan. 7, the mediation was set to begin with a pre-mediation conference on Jan. 7. The mediation is to conclude by Jan. 21.
As reported, shortly after the company announced on Aug. 19 that it had entered into an RSA with holders of more than 57% of its unsecured notes, the company received a notice of acceleration from Wells Fargo, the administrative agent under its first-lien credit agreement, declaring that $1.123 billion in principal amount outstanding of loans, $1.3 million in outstanding letters of credit, and all other obligations under the credit agreement were immediately due and payable.
Subsequently, the company several times announced an extended deadline to file for Chapter 11 bankruptcy protection, which it planned to do to implement the RSA, as it continued talks with lenders.
The company filed bankruptcy on Nov. 2. Its CEO, Stephen Lebovitz, said at the time, "We have continued negotiations with the lenders under our secured credit facility since the signing of the RSA and expect further discussions in an effort to reach a tri-party consensual agreement between the company, noteholders and credit facility lenders during the bankruptcy process."
Bankruptcy court filings, however, told a more complex story.
According to an adversary action the company filed against Wells Fargo in connection with its Chapter 11 petition, "Immediately after receiving a restructuring term sheet proposed by the ad hoc bondholder group [in late October] that apparently offended the bank lenders, Wells Fargo suddenly purport[ed] to exercise a number of remedies that it allegedly possesses, including proxy rights, to exercise control over [properties serving as collateral under the credit facility] and the rent derived therefrom."
Mark Renzi, the company's restructuring adviser, told the bankruptcy court in his first-day declaration that Wells Fargo "abruptly cut [the negotiation process] short."
That "left the company no choice but to commence these Chapter 11 cases on an accelerated timeline to protect the company and its stakeholders," according to Renzi.
The company called Wells Fargo's actions "naked attempts to gain advantage during restructuring negotiations." The company denies that it defaulted under the agreement.
Through the Chapter 11 filing and adversary action, the company was able to put a halt, for the time being, to Wells Fargo's collections of the company's rent payments for certain properties covered by the credit agreement. Wells Fargo, for its part, filed a counterclaim against the company seeking a declaration that the company was in default under the agreement and seeking the right to receive the rent payments.
In agreeing to the mediation, the parties agreed "that mediation may be an efficient and effective mechanism to consensually resolve all issues relating to these Chapter 11 cases, including the plan and the Wells Fargo adversary proceeding."
Meanwhile, the Chapter 11 process is pushing ahead, bringing litigation between the company and Wells Fargo to a head and setting the parameters for the mediation timetable.
A trial in their dispute is slated to begin next week, while separately, the company filed a proposed reorganization plan and disclosure statement on Dec. 29. A hearing on the adequacy of the disclosure statement is set for Feb. 5.
As also reported, the proposed plan and disclosure statement are missing valuation information and indicate that a number of terms are still to be negotiated. Court filings state, however, that the company will file a revised reorganization plan and disclosure statement by Jan. 21 — the same as the termination date for the mediation.
