General Growth Tries to Buy Time

General Growth Properties is asking its lenders for until the end of the year to refinance debt, so it can avoid filing for bankruptcy.

The mall owner has $1.18 billion in past-due debt and $4.09 billion that can be accelerated by lenders. It is giving lenders until March 16 to respond.

The good news (we think) is that General Growth is getting offers for at least a few of its 200 malls. A Bloomberg report says bidders have offered $400 million for Faneuil Hall in Boston, Harborplace & the Gallery in Baltimore and South Street Seaport in New York City. Apparently, a “private buyer” is interested.

If they can knock out that deal and maybe sell another major property, or 10, this whole nasty debt thing won’t be such a problem anymore, huh? Of course, this is probably the WORST time possible for the REIT to try to sell these assets.

So do you think the banks will take GGP up on its offer?


14 Responses to “General Growth Tries to Buy Time”

  1. 1 Niranjan March 10, 2009 at 7:09 am

    I am sure that there would be many banks who has got the JV partnership with GGP will be intrested in the buyout of the assets!

  2. 2 Peter K March 10, 2009 at 7:53 am

    Bankruptcy isnt the end of the company, it just wipes out shareholder value and forces the creditor banks to participate in ownership and selling.
    A better approach which i am sure they are doing is to act like they are in BK and compel banks to become equity partners in certain properties or even shed some of the properties. I assume most of the lenders will have no choice but to work with GGP through this problem.
    If they can sell a few assets, i think the majority of the lenders should allow term extensions in return for partial paydowns of 5%-15% of debt. Many banks are doing that very structure on smaller deals. This way the property is “parked” a few more years until there is some economic recovery and hopefully a stronger sales market.

  3. 3 Derrich March 10, 2009 at 7:58 am

    I’ve seen alot of apartments change hands lately. I’d have to agree that this is a pretty bad time to sell. Maybe a prefect opportunity for some of this cash to come off the sideline to purchase a rock bottom-priced asset.

  4. 4 Michael V March 10, 2009 at 8:21 am

    Problem is in a management team that banks are not comfortable with. Apparently they do not have enough trust in their capability to weather this storm. They are better off selling assets at today’s market price.

  5. 5 Derrich March 10, 2009 at 8:25 am

    I agree with Peter. While banks becoming equity partners is less likely, extension of terms with principal reductions is becoming the norm. Regardless, it appears that GGP may have to liquidate some of those properties in order to satisfy those reductions.

  6. 6 Broker March 10, 2009 at 10:19 am

    You wonder why the banks won’t give them until the end of the year in exchange for some added equity injected into the deal. That would give GGP some breathing room to sell some smaller properties at a reasonable price to pay off some additional debt. What are the banks going to do with the money; make some more subprime mortgage loans?

  7. 7 Alex March 10, 2009 at 1:05 pm

    WOW IAN – looks like no one cares enough about India to post on yesterday’s blog but everyone’s ready to comment on GGP!

    Peter – if bankruptcy wipes out shareholder value then why is Ackman increasing his stake in the company?

  8. 8 LimpAlong March 10, 2009 at 2:13 pm

    With all of the headaches the banks are facing just trying to stay afloat, it’s not amazing that they keep extending. At this point, they have bigger fish to fry than GGP, but that’s a window that’s quickly closing. The vultures are circling the half alive carcass.

  9. 9 RatingsDowngradedAgain March 10, 2009 at 6:04 pm

    Fitch just downgraded GGP again from C to RD (Restricted Default status, or they’re not in bankruptcy, but there is an uncured payment default on a material obligation).

    Even if they manage to keep the lenders at bay until year end, they still have billions more in debt over the next 3 years. If they completely liquidated and sold all of their properties, they still likely wouldn’t have enough. At least GGP isn’t running to the government for a bailout, like AIG, Citi and the rest.

    Maybe if GGP had gotten into the credit default swap business, they could have run to the government with a WE’RE TOO BIG TO FAIL cry, like AIG. By the way, where in the world HAS all that money gone that we’ve given to AIG? Why is the information being held in a BIG BLACK BOX?????

  10. 10 Bob March 10, 2009 at 6:21 pm

    What about the shareholder lawsuit – that’s a messy piece.
    The Chinese are here to buy residential, so let’s be wary of commercial following suit or Dubai or who ever….
    Be vary wary of the future on GGP

  11. 11 WRandolphHearst March 11, 2009 at 1:00 pm

    We already have the Germans (the Otto family, listed as 34th wealthiest in the world) taking a 20% stake in DDR for a song. Seems like our taxpayer money (TALF)is going to fund foreigners stealing our assets out from under us.

  12. 12 Dana March 12, 2009 at 8:51 am

    GGP’s properties are both complex and well-run operationally. No sane banker is going to want to risk becoming an owner here. Absent an assured sale on foreclosure, the banks are going to work these out.

  13. 13 BanksATanking March 13, 2009 at 2:14 am

    To Ratings Downgraded Again:
    I suspect the powers that be do not want the American public to know that their taxpayer dollars are going out to payoff foreign banks and interests while the American public suffers the Great Depression Part Deux. Just like the Great Depression in the Thirties, Foreign countries benefited from the currency manipulations of Lord Montagu Norman in favor of the British pound; the British pulled the rug out from under the US, who was the last country still on the gold standard, and the US suffered the most from the Great Depression. Read History.

  14. 14 FiscalPearlHarbor March 13, 2009 at 2:26 am

    Exactly, this is why Warren Buffet is saying we are in a 5 year WAR; He’s referring to it as a “FISCAL PEARL HARBOR.” Remember, in Pearl Harbor, the US was attacked by foreign enemies.

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