Mall owners may be the next batch of businesses to take a tumble as 2008 nears a close.
Already,
two of the largest retail property owners in the U.S. -- General
Growth Properties Inc. and Centro Properties Group --
have been in talks with their lenders
to renegotiate the terms of close to $10 billion in bank loans and
credit lines. In General Growth's case, a failure to win concessions on
its lending terms could place it in default and prompt a bankruptcy
filing.
Continue reading below
General Growth, which owns and manages 200 malls in the
U.S., had until Dec. 12 to pony up payments on a $900 million loan from
a collective of lenders that included Deutsche Bank AG, Eurohypo AG,
Wachovia Corp., Bank of America Corp., Goldman Sachs Group Inc. and
Citigroup Inc. On Sunday, however, Citigroup reportedly
blocked a deal that would have given General Growth an extension to
repay the debt, which could force the Chicago-based mall owner to file
for bankruptcy if it is found to be in default on its obligations. The
bank previously halted General Growth's attempt to revamp its debt two
weeks earlier by demanding changes to the terms of a $2.6 billion
credit line and term loan issued in 2006.
Meanwhile, Melbourne,
Australia-based Centro -- the owner of 650 American malls -- held separate
talks with its lenders overseas on Monday to renegotiate the
terms on $6 billion in debt due at the end of the day. Hoping for at
least another year and lower interest rates, the mall owner is now
offering to convert $1 billion of its debt into equity.
This
near-final blow dealt to the retail industry comes following a tide of
bankruptcies that has enveloped retailers such as KB Toys Inc., Circuit
City Inc. and Steven & Barry's LLC, which is set to liquidate after
filing for Chapter 11 for the second time in 2008, demonstrating that
no sector of the economy has been insulated from the effects of the
recession. - Carolyn Okomo
