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The Wall Street Journal reported Monday that the second-largest mall owner in the U.S. has abandoned a consent solicitation offer that would have given General Growth until Dec. 31 to make required interest and principal payments on roughly $2.25 billion in unsecured notes issued by subsidiary Rouse Co. LP. The forbearance deal, among other actions, would have given consenting noteholders 62.5 cents in cash each quarter for every $1,000 in debt held. In exchange, holders of notes that matured March 15 and will mature April 30 were to forbear from not being paid principal on the maturing notes, and holders of those notes, as well as three other series, were to forbear from not receiving cash interest. The consent solicitation, however, required approval from 90% of the holders of maturing notes and 75% of other noteholders. "Although we did not achieve the minimum
acceptance levels for each series of notes, we did receive a
significant number of consents from the holders of all five series," General Growth CEO Adam Metz said in a Monday statement. Discussions with lenders on a $2.58 billion credit facility and an ad hoc committee of noteholders continue. Will they be fruitful? The
Chicago company, which owns or manages more than 200 malls in 44
states, has already been working to restructure its debt load for
months as billions of dollars in short-term debt nears maturity -- $3.31
billion in 2009 and $6.43 billion in 2010. In an ominous sign for other
retail landlords, General Growth has been laid low by declining sales
and bankruptcies of its tenants, which in turn has led to reduced
revenue for General Growth. The company also finds itself forced to reduce rents and unable to refinance or repay maturing loans. Shares tumbled 98% from an adjusted $39.34 close on Dec. 31, 2007, to 66 cents on March 20 and were down an additional 11% to 59 cents at midday Monday. General Growth did announce March 16
that it had reached a forbearance deal with its bank lenders under
which they agreed to not act on certain events of default through Dec.
31. Still, the mall owner, which has warned of a potential voluntary or
involuntary Chapter 11 filing, had $1.18 billion in past due debt as of
Feb. 26, according to its Form 10-K
filed with the Securities and Exchange Commission. So now the question
is how long General Growth can really keep its scores of debt holders
mollified. - David Elman
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Time apparently is running out for General Growth Properties Inc. (NYSE:GGP) as it seeks to stay out of bankruptcy court.
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