Destiny USA’s Junk Bonds get a new trustee as the mall owner seeks a debt deal

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Syracuse, NY – $ 285 million bondholders who helped finance an expansion of Destiny USA hire a new trustee as the troubled mall owner seeks debt relief.

Trimont Real Estate Capital, the bondholder representative, announced to the Syracuse Industrial Development Agency last week that it plans to remove the current bond trustee, M&T Bank, based in Buffalo, and asked the agency to create a new one, USB Bank to approve. The agency voted 4-0 today for USB’s appointment.

Judith DeLaney, executive director of the agency, said Trimont gave no reason for the move. However, she said she believed this was related to efforts by mall owner Pyramid Management Group to negotiate a $ 715 million debt reduction for the mall.

Trimont did not respond to a request for comment.

Bond trustees are appointed by bond issuers – in this case, the Syracuse Industrial Development Agency – to help ensure, among other things, that principal and interest are paid to bondholders in a timely manner. M&T has acted as trustee since the bonds were first issued in 2007 to assist Pyramid in financing a major expansion of the Syracuse shopping mall, then called the Carousel Center.

Kansas City-based USB Bank provides many services to companies, including acting as a bond trustee. But there is also a so-called “distressed debt team” that is filled with workout specialists.

“Each of our workout specialists has prior experience as a practicing attorney, which enables our team to provide an unprecedented level of insight and service,” states their website for the bank. “We understand the legal and administrative complexities of distressed debt and work closely with borrowers, bondholders and professionals to achieve the recovery goals …”

The goals are achieved, among other things, through amicable rescheduling, negotiated deferral agreements and bankruptcies.

Destiny, the largest mall in New York and one of the largest in the country, posted an estimate of $ 203 million last year, far less than the property’s debt load of $ 430 million in mortgage loans and $ 285 million in debt Bonds.

The mall was hurt by the loss of retail tenants and buyers during the coronavirus pandemic that forced Destiny to close for four months last year. But the mall’s struggles began even before the pandemic, as consumers moved to online retailers, large retail stores and open-air shopping areas and away from closed malls.

As a result, Destiny’s bond ratings have fallen to junk status. In June, Moody’s Investors Service warned that financial stress has increased the likelihood that Pyramid will no longer receive the bonds.

Although they issued the bonds, the urban development agency is not taking any chances if Pyramid does not pay them off. Bondholders, however, could foreclose the mall.

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