American Dream bondholders on the verge of a reprieve

Bondholders of New Jersey’s American Dream Mall have been beset with a barrage of bad news, but a glimmer of hope is coming in the form of cash.

Trustee US Bank is slated to pay $25.7 million next week to bondholders for past-due interest, Bloomberg reported. That’s slightly more than half of the past-due interest total of $46.4 million as of the beginning of the month, according to a securities filing from Friday.

The construction of the East Rutherford megamall was financed in part with $287 million worth of municipal bonds. For two years, however, bondholders have been waiting to recoup some of that as payments were repeatedly missed on the debt. Fortunately for mall owner Triple Five Group, that didn’t constitute default.

The unrated bonds are backed by New Jersey economic development grants. Those grants didn’t come through as state officials failed to certify a project cost statement and the state Treasury struggled to calculate the grant amount; grant funds are linked to tax revenue from sales at the mall.

While bondholders will get a slight boost when the payment comes on Tuesday, Triple Five still has plenty of obstacles in making backers happy. The Ghermezian family borrowed $1.1 billion in the municipal bond market to build the mall at a cost of $5 billion, and have faced lawsuits from lenders and headlines about struggles on a quarterly basis.

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The mall then struggled out of the gate, decimated by poor timing as the mall’s opening was quickly marred by the pandemic. There have been some signs of a turnaround recently, as sales in the second quarter rose 12 percent year-over-year, according to a bond filing, to roughly $149 million. In the first quarter, sales jumped 30 percent year-over-year.

Still, those numbers are a far cry from the $2 billion annual sales pace projected for the mall in 2017, two years before it opened.

— Holden Walter-Warner