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Prime Retail Holds Bankruptcy at Bay

BALTIMORE, MD-A series of transactions, including the sale of four outlet centers and payment of short-term debt, is keeping Prime Retail Inc. out of bankruptcy court. Costly loan extensions are also in the works.

By Diane Cook | Updated on December 27, 2000

BALTIMORE, MD-The sale of four outlet centers and payment of some short-term debt is keeping Prime Retail Inc. out of bankruptcy court. The REIT defaulted on a $20 million subordinate loan from FBR Asset Investment Corp., due in September that triggered other default provisions.

The $240 million sale of four outlet centers to Chelsea GCA Realty Inc. and Fortress Investment Group yielded net proceeds of $174 million to Prime. These funds paid $125 million in short-term debt.

Other deals in the mix include:·A $90 million mezzanine loan from Fortress and Greenwich Capital Financial Products Inc. The three-year loan rate is one-month Libor plus 950 basis points — 15.66% based on the current rate. In exchange for the loan, Fortress and Greenwich received warrants, with a $1/share exercise price, to buy up to 1 million common shares of Prime.·A $20 million first mortgage from Greenwich Capital backed by a recently opened outlet center in Puerto Rico. The three-year floater amortizes over a 25-year schedule for its first year and over a 15-year schedule thereafter. Its rate is tied to one-month Libor plus 350 bp.·A $10 million second mortgage that Mercantile-Safe Deposit and Trust Co. provided on Prime’s outlet in Hagerstown, MD. The 30-month’s maturity coincides with that of a $49 million first mortgage from Mercantile at Libor rate plus 250 bp.Prime extended two mortgages: a $112 million first mortgage from Nomura Asset Capital Corp. and a $20 million mortgage from KeyBank.

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