The high-profile rent strike being waged by retailers like Gap, L Brands, and others could force shopping mall operator CBL & Associates (OTC:CBL) into bankruptcy.
The real estate investment trust said in its first-quarter earnings report, released this morning, that its ability to continue as a going concern was in jeopardy: "Given the impact of the COVID-19 pandemic on the retail and broader markets, the ongoing weakness of the credit markets and significant uncertainties associated with each of these matters, 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."
Earlier this week, CBL said it skipped an $11.8 million interest payment due June 1 that put it in default of its debt covenants, giving the debt holders the right to accelerate the maturity dates of its loans, though as yet they have not chosen to do so.
CBL has said it has received numerous requests for rent relief from a majority of its tenants. It only received 27% of the rent due in April and expects May's collections will be between 25% and 30% of the full amount.
Industry peer Simon Property Group is suing Gap for non-payment of its rent. CBL is also contending with the struggles of its tenants; J.C. Penney has 47 stores in CBL's malls, and CBL expects eight of them to close permanently. The department store chain surprised everyone in April by making its rent payment.
CBL has hired advisors Weil, Gotshal & Manges and Moelis & Co. to explore a possible reorganization, among other options.