NEW YORK —

The Baltimore, Md.-based Prime Retail also reported a loss in funds from operations of $2.6 million, or 6 cents a diluted common share, compared with a profit of $20.9 million, or 39 cents a diluted common share, from the same quarter last year. Results for the current quarter were dampened by reduced occupancy and increased expenses, among other factors, the company said.

The company also said in light of its second-quarter shortfall, it is not in compliance with financial covenants in certain debt facilities, prompting some of its lenders to threaten default.

The company in a statement said it is in discussions with the affected lenders about either paying off the loans in their entirety or modifying the terms and financial covenants so that