Prime Retail Inc., the troubled Baltimore owner of outlet shopping malls, said yesterday that it had reached a financial milestone by paying off a $90 million, high-interest loan the company viewed as a key piece of its turnaround strategy.

Prime, which has struggled with burdensome debt and lower sales and occupancy at its malls, obtained financing in December 2000 to stave off bankruptcy.

The package included a $90 million "mezzanine loan" from Fortress Investment Fund LLC and Greenwich Capital Financial Products Inc., with an interest rate of nearly 20 percent.

Mezzanine loans are subordinate to bank and secured loans, and typically offer higher yields.

Paying off the loan erases the threat of bankruptcy and opens possibilities that could include acquiring shopping centers and expanding or re-merchandising existing centers, said Robert A. Brvenik, Prime's president and chief financial officer.

He called an impromptu meeting of employees at the company's Pratt Street headquarters yesterday to share the news.

"It is hoopla over here at Prime Retail," Brvenik said. "This is a great day. The mezz loan is paid off."

The real estate investment trust used net proceeds from recent sales of three shopping centers, plus cash, to repay the loan's remaining $30.2 million principal balance, Brvenik said.

The company has been paying down the debt over the past two years mostly with proceeds from the sale of 11 shopping centers, as well as with the proceeds of mortgage refinancing and cash from operations, Brvenik said.

"Under the mezzanine loan, we were fairly restricted in terms of investments and how we could utilize our cash and time," Brvenik said. "This gives us the opportunity to refocus on our normal business operations."

The company has also reduced overall debt, from a high of $1.2 billion in September 2000 to $526 million currently, he said.

"We don't have to pay down debt for the sake of paying down debt," Brvenik said. "We are at rational debt levels for our business."

Prime now owns or manages 38 outlet shopping centers in 24 states, down from a peak of 52 centers in 26 states in 2000, when the company's high debt forced it to start selling off centers and resort to high-priced loans.

To pay off the remaining balance of the mezzanine loan, which would have matured in September, Prime in early December sold two centers in Colorado for $96 million and the company's newest center, in Barceloneta, Puerto Rico, for $36.5 million.

Paying off the mezzanine loan early will save the company nearly $6 million in interest, Brvenik said. He said the company is not offering any earnings guidance for next year.

For its most recent quarter, which ended Sept. 30, Prime reported that funds from operations rose 25 percent to $6.9 million as interest expenses dropped and fewer retail tenants declared bankruptcy or closed stores.

Funds from operations are considered the best measure of a real estate investment trust's performance.

Prime, which has seen its share price plunge from a high of more than $16 per share in 1997 to 12 cents per share at yesterday's closing, has not been able to pay shareholders dividends.

Prime's chief executive officer, Glenn D. Reschke, had said that paying down the debt before the end of the three-year term would allow the company to restore its dividend. But yesterday Brvenik said, "We do not anticipate a return of the dividend in the near future."

Since the company's struggles began, and the company was de-listed from the New York Stock Exchange, analysts have dropped coverage of the company. One analyst who had covered the company called yesterday's announcement a significant step.

"It is a significant hurdle that the company has paid off the balance of its high-interest obligation," said David M. Fick, a managing director at Legg Mason Wood Walker Inc. in Baltimore. "It certainly is significant that they've completed sufficient asset sales to get to the point where their largest single hurdle has been reached."

He said the company still faces significant hurdles - such as paying for improvements for retail tenants and maintaining leasing levels. The outlet centers were 89.1 percent leased as of Sept. 30.

Brvenik said the company now would take a hard look at its shopping center properties and consider expanding, upgrading, re-tenanting or even selling centers. The company is also in a position to consider acquiring centers, he said.