Apr 16, 2009

Mall Titan Enters Chapter 11By Kris HudsonOnline.WSJ.com

Mall owner General Growth Properties Inc. sought bankruptcy protection early Thursday in one of the largest real-estate failures in U.S. history, capping a precarious, months-long effort to juggle the crushing $27 billion debt load it shouldered in past acquisition sprees.

The long-anticipated Chapter 11 filing might wipe out what remains of the Chicago company’s stock, but it won’t result in mall closures. Many analysts suspect General Growth will survive a lengthy bankruptcy intact, but perhaps smaller after selling properties, without resorting to liquidation. General Growth, which owns and manages more than 200 malls, is the second-largest U.S. mall owner by number of properties behind Simon Property Group Inc.

General Growth’s board opted Wednesday to make the filing in U.S. Bankruptcy Court in New York after efforts to piece together a plan for an out-of-court restructuring with a growing list of creditors failed to gain traction, according to people familiar with the talks. The filing includes General Growth, its Rouse Co. subsidiary and most of its malls. It doesn’t include General Growth’s management company or joint-venture holdings. All told, the filing covers roughly $24 billion of debt, these people say.

A General Growth spokesman didn’t immediately return messages seeking comment. Trading of the company’s stock closed Wednesday at $1.05, down 1 cent, in 4 p.m. composite trading on the New York Stock Exchange. The stock has declined by more than 97% in the past year.

Finally forcing the bankruptcy filing after months of payment-deadline extensions was General Growth’s failure to secure a deal with holders of $2.25 billion of its bonds to abstain from demanding immediate payment while the company tried to restructure its balance sheet outside of bankruptcy. Several holders of past-due bonds notified the company last Monday that they intended to sue for immediate payment. Meanwhile, additional debts came due on an almost weekly basis, making an out-of-court deal more challenging to reach.

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