A report by Fitch just out, spreading some more doom and gloom, after the earlier news of a forbearance being sought by the mall operator which is bankrupt in all but name.
GGP RUNNING ON FUMES ON FORBEARANCES; IDR DOWNGRADED TO "RD"
Fitch Ratings-New York-10 March 2009: Rouse Company LP (Rouse) bondholders are likely to see term reductions due to the nonpayment of principal at maturity on two series of notes maturing in the coming months, according to Fitch Ratings, which has maintained the Rating Watch Negative status on Rouse's 'C' Issuer Default Rating (IDR) and downgraded the IDR and outstanding debt ratings of General Growth Properties (NYSE: GGP) to 'RD' from 'C'. Fitch has also removed GGP from Rating Watch Negative.
An 'RD' rating denotes 'Restricted Default' status. Today's downgrade of GGP is consistent with Fitch's updated definitions for its rating scales for entities at different stages of distress.
The rating downgrade follows General Growth Properties' entry into multiple forbearance agreements upon a payment default with its syndicates of lenders for its revolving credit facility and term loan entered into in 2006 and its secured mortgage loan facility entered into in 2008. 'RD' ratings indicate an issuer that has experienced an uncured payment default on a material financial obligation but has otherwise not entered into bankruptcy filings, administration, receivership, liquidation or other formal winding-up procedures.
The downgrade in GGP's rated obligations to 'C/RR5' from 'CC/RR5' is consistent with Fitch's revised Recovery Ratings (RRs) matrix for IDRs in the low speculative category.
Fitch has maintained Rouse's 'C' IDR on Rating Watch Negative based on GGP's announcement yesterday that Rouse launched a consent solicitation to holders of Rouse's unsecured notes to forbear from exercising remedies with respect to various payment and other defaults under the unsecured notes through Dec. 31, 2009.
Fitch views this consent solicitation as a coercive debt exchange, as it would result in a material reduction in terms to bondholders due to the nonpayment of principal at maturity with regard to notes maturing in April and May 2009, and nonpayment of cash interest on all of Rouse's unsecured notes until at least Dec. 31, 2009. Absent the consent solicitation, there is a high probability of a Rouse bankruptcy or insolvency over the near term, resulting in the consent solicitation being coercive (de facto necessary even if voluntary).
The downgrade in Rouse's rated obligations to 'C/RR5' from 'CC/RR5' is consistent with Fitch's revised RRs matrix for IDRs in the low speculative category.
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