GGP Looks to Exit Bankruptcy with $3.9bn Cash Infusion

General Growth Properties (GGP) will get a nearly $4bn infusion of cash from two of its biggest unsecured creditors to help the struggling retail real estate investment trust (REIT) exit bankruptcy under a proposal announced Tuesday. The $3.925bn deal, if accepted and combined with the previously announced $2.625bn proposal from Canadian developer Brookfield Asset Management (BAM), would provide Chicago-based GGP with more than $6.5bn in equity. That, along with the $1.5bn debt offering GGP will make as a condition of the Brookfield deal, should provide GGP enough capital to fulfill the company’s needs to emerge from bankruptcy and provide unsecured creditors with par plus accrued interest in cash. Miami-based Fairholme Capital Management, one of GGP’s largest unsecured creditors, and New York City-based Pershing Square Capital Management, one of its largest equity holders and a significant unsecured creditor, said they would commit the nearly $4bn of new equity capital at a value of $15.00 per share. The new deal is subject to approval by GGP’s board of directors and the bankruptcy court. “The proposal from Fairholme and Pershing Square builds on the significant momentum we have created to return GGP to a strong financial foundation for the future,” said GGP CEO Adam Metz. “Our goal is to raise capital in the most cost-efficient way to maximize value for all of our stakeholders. We are pleased with the support shown by one of our largest unsecured debt holders and one of our largest equity holders.” Under the terms of the proposal, $3.8bn would be used to purchase shares of GGP stock at $10 per share and $125m will be used to “backstop” the remaining portion of a $250m rights offering by General Growth Opportunities (GGO), a new company that will own certain non-core assets, at a price of $5 per share. A provision of the deal allows GGP to reduce the $3.8bn stock purchase by up to $1.9bn so long as it is able to raise equity capital on more attractive terms. GGP said the proposal from Fairholme and Pershing Square is not subject to due diligence. However, to help facilitate the proposal, Pershing Square founder and CEO William Ackman resigned from GGP’s board. Ackman, who has been called an activist investor, joined the GGP last spring shortly after it filed for bankruptcy protection. Pershing Square provided $375m in debtor-in-possession financing for GGP to run its operations during bankruptcy. As HousingWire previously reported, Brookfield’s $2.63bn deal calls for GGP to create a second company GGO, which will own certain GGP non-core assets, such as all of the company’s master planned communities and landmark developments like South Street Seaport and others. Under the terms of the plan, GGP shareholders will receive one share of new GGP common stock initially valued at $10 per share, and one share of GGO stock. Until the court approves the warrants, Pershing Square is providing “interim protection” to Brookfield. GGP said if the Brookfield deal doesn’t go through and it completes a transaction with another party at a per share value above $12.75, Pershing Square will be obligated to pay Brookfield 25 percent of its profits from its investment in GGP above $12.75 per share. However, GGP will not be required to reimburse Pershing Square for any amounts paid pursuant to this agreement. GGP has continued with its restructuring plan with Brookfield, and now the two creditors, despite an unsolicited $10bn offer from one of GGP’s rivals, Indianapolis-based retail REIT Simon Property Group (SPG). After Simon made its offer public, GGP rejected the Simon offer, resulting in a public back-and-forth between the two shopping mall rivals. Last week a bankruptcy judge granted GGP a nearly five-month extension period to file a plan of reorganization for the company to exit bankruptcy. The judge said GGP now has until July 15 to file a reorganization plan, and no other party is permitted to file a competing plan of reorganization. In addition, the judge granted GGP an extension of the period to solicit acceptances of a plan of reorganization through September 15. The extension is about a month shorter than what GGP originally requested. GGP also announced it applied to re-list its stock on the New York Stock Exchange. Write to Austin Kilgore. The author held no relevant investments.

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