Monday, April 13, 2009

Bondholder Group Asks Trustee To Sue General Growth Partners

Looks like at least someone will not take the ongoing criminality of the sociopathic market any longer.

From from the WSJ:
A group of bondholders have ratcheted up the pressure on General Growth Properties Inc. by asking their trustee to sue the debt-laden mall owner for payment of their past-due bonds.

Law firm Wilmer Cutler Pickering Hale and Dorr LLP on Monday sent a letter to General Growth and the law firm representing many of its bondholders explaining that it represents holders of 25% of the company's $395 million in bonds due last March 16 that weren't paid, according to people familiar with the matter. Bondholders must collectively represent at least 25% of a given bond issue to compel a trustee to act on their behalf. A General Growth representative declined to comment Monday. A representative of Wilmer Hale couldn't immediately find the appropriate attorney to comment on Monday afternoon.

The bondholders' action pushes General Growth closer to a bankruptcy filing but doesn't mean that one is imminent. A trial spurred by the bondholders' lawsuit likely would take months to play out. Meanwhile, General Growth previously pledged to work with its unsecured lenders to craft an out-of-court restructuring of its balance sheet by the end of June. If General Growth meets that commitment, the trial might not be needed.Meanwhile, the bondholders' trustee – Bank of New York Mellon – likely will want to confirm which bondholders Wilmer Hale represents. That information isn't outlined in the law firm's letter. General Growth, based in Chicago, owns and manages more than 200 U.S. malls. The company has for months negotiated with its lenders for
extensions of its payment deadlines on chunks of its $27 billion debt load, repeatedly warning that it might need to seek Chapter 11 bankruptcy protection if it can't get reprieves. So far, roughly $2 billion of General Growth's debt has come due and gone unpaid while the company tries to craft its out-of-court restructuring with its lenders.Trading of General Growth's stock closed Monday at $1.05, up 10 cents, in 4 p.m. composite trading on the New York Stock Exchange.

Let's see how this news causes another mega squeeze in anything that is not nailed down. Sphere: Related Content
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Fish Gone Bad said...

I live by 4 of GGP's malls. I see people buying food and talking to their friends, but few people are carrying a bag, let alone an armload of bags. The only people in the stores are the employees.

My recommendation to any GGP bondholder: Get in line first to get your money, because there is not a lot of it coming back to ANYONE.

Anonymous said...

i'm not familiar with the BK law but why don't the bondholders call default?

Unknown said...

The interesting thing that separates a bankruptcy for a real estate manager from another type of company is that real estate managers really just have the assets, whereas another company might have a valuable management team or market share in place that is worth preserving post bankruptcy.

John Reeder

mr. creasote said...

"because there is not a lot of it coming back to ANYONE."

just not to the unlucky bastards with not enough juice to buy CDS protection.

stay tuned for the next episode of As Tom Friedman's World (is Fat) Squirms:

ISDA Rouse auction this Weds.
same zero time.
same Channel Zero.

long GGP, but not for much longer

Anonymous said...

Tyler - the reason that GGP has not gone into chapter 11 like most companies in its precarious position is simple. It has to do with the tension between the Tax Code and the Bankruptcy Code. Under the Tax Code, GGP (as a REIT), has to pay 90% of its income as dividends to equity. Under the Bankruptcy Code, equity can't get anything until all creditors are satisfied. Since it is likely insolvent, it won't b able to pay creditors 100% and therefore can't pay dividends. That may trigger huge tax payments which would potentially wipe out any value in a reorganization under chapter 11. So nobody wants that Sticky situation that no doubt has many lawyers working overtime to figure out how to split the pieces. Wilmer Hale, once again, is out to lunch.

GGP Gauntlet said...

"Hope is not an exit strategy."