Friday, April 17, 2009

General Growth’s Chapter 11 Filing Called Largest in U.S. Retail Bankruptcy History

CHICAGO, IL—In what industry insiders are calling the largest retail real estate bankruptcy filing in U.S. annals, Chicago-based General Growth Properties Inc. has voluntarily filed for protection from its creditors under Chapter 11 of the U.S. Bankruptcy Code.

(South Market in Boston, one of General Growth Properties' assets, top right photo)

Industry sources in a position to know say the General Growth Properties’ filing could be the first of several similar legal actions that may also be taken voluntarily this year by other major retail developers and investors.

Shopping center industry watchers predicted the April 16 filing after the 45-year-old mall developer couldn’t get all of its creditors to extend loan payment and payoff dates until the end of this year or longer, as Real Estate Channel previously reported.

Courts in several states in March had already ordered the seizure of about six GGP shopping centers after the developer failed to meet various loan payment deadlines.

GGP’s filing in New York listed assets of $29.5 billion and debts of about $27.3 billion.

In a prepared statement, the company said all of its 200 retail centers in 44 states will remain open for business as its bankruptcy hearing continues in the Southern District of New York’s federal bankruptcy court in New York City.

Pershing Square Capital Management LP of New York City is loaning GGP $375 million to help with day-to-day operational costs.

Pershing principal William Ackerman (middle right photo) has previously stated his firm is taking a 25 percent ownership stake in the shopping center company. That would make Pershing the third largest shareholder in General Growth Properties.

The Chapter 11 filing lists Eurohypo AG of Eschborn, Germany, a unit of Commerzbank AG, as GGP’s largest unsecured creditor with claims on two loans totaling $2.59 billion.

Eurohypo is the administrative agent for 175 separate creditors. Only 10 percent of the loans are held by Eurohypo. Note holders of General Growth Properties bonds are owed a total $4 billion.
“Our core business remains sound and is performing well with stable cash flows,” says GGP CEO Adam Metz. “We believe that chapter 11 is the best process for restructuring maturing mortgage loans, reducing the company’s corporate debt, and establishing a sustainable, long-term capital structure for the company.

“While we have worked tirelessly in the past several months to address our maturing debts, the collapse of the credit markets has made it impossible for us to refinance maturing debt outside of chapter 11.”
Metz said in the prepared statement, “The company has requested, and expects to receive, additional (court) approvals to give the company the authority to make payments to ensure that the company’s shopping centers and other properties continue to operate uninterrupted in the ordinary course of business, including paying employee compensation, certain critical service providers, insurance and other claims.

“The Company intends to pay all providers of goods and services delivered post-petition.”

General Growth Properties’ portfolio totals about 200 million square feet of retail space and includes over 24,000 stores nationwide.
(Faneuil Hall Marketplace, Boston, one of General Growth Properties' assets, bottom left photo)

The Company is listed on the New York Stock Exchange under the symbol GGP. Its common stock traded today (April 16) at $1.05, up from 57 cents on March 21 but down from its all-time high of $67 per share in March 2007.