Thursday, March 12, 2009

GGP's Future To Be Decided By Three Bondholders

As Zero Hedge wrote, GGP may be forced to file for bankruptcy next Tuesday unless its proposed consent solicitation passes, which is contingent on the acceptance of 90% of its 2009 bondholders and 75% of the holders of 2012-13 notes. However, the blocking power on the deal lies with any combination of just three bondholders, as the deal changes material maturity and coupon terms. If three holders disagree to the terms, they can gang up and accelerate the company, thereby plunging the REIT into bankruptcy. As debtwire reported earlier, during an ad hoc bondholder call on Tuesday, legal counsel Paul Weiss recommended forbearance as the proper route of action, which however has split holders into two camps: far and near maturities. While the long-dated bonds are likely to go along with the forbearance due to the chance of getting paid out at par in several years, the near-maturities are not so happy with the terms of the exchange which puts them on equal footing with longer dated bondholders. The one recourse 2009 maturities do have that the long-dated bondholders currently do not have is the ability to push the company into default and thus maximize recoveries for themselves instead of seeing their assets bleed over the next several years with uncertain recoveries in the future. Financial advisors on both side, Miller Buckfire and Houlihan Lokey are scrambling to prevent a free fall Chapter 11 although at this point it may be too late, absent some late weekend renegotiations of the consent with potentially some preferrential terms being granted to the 2009 holders. Sphere: Related Content
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