Large Mall Owner Seeks Approval

By: Timothy McFarlin | Published: July 13th, 2010 | Category: Bankruptcy

According to Reuters, General Growth Properties Inc., is seeking to swap its present $400 million loan (given last year to the company so it may continue to function despite bankruptcy) for one which could save the company roughly $2.7 million, a month, in interest payments.

In documents filed in New York City’s US Bankruptcy Court, the new loan in question features a fixed interest rate of 5.5% which would take over the initial debtor-in-possession, or DIP, loan, which had an interest rate of London Interbank Offered Rate, or LIBOR, plus 12% as well as a 1.5% LIBOR floor.

General Growth Properties Inc. has placed approximately $970.5 million in escrow, and is now awaiting the bankruptcy court’s approval. This, according to court documents, is what gave way for General Growth to enter a DIP credit agreement. The new loan will be reviewed during an upcoming court hearing on July 22nd.

General Growth secured inexpensive financing when a group lead by Brookfield Asset Management Inc. agreed to give them over $6.55 billion, in support of their exit from bankruptcy. General Growth Properties owns, manages and has vested interest in more than 200 regional shopping malls, across forty-five states, and in seven master planned communities.

The company presently owns the world’s largest open-air shopping mall in Honolulu, Hawaii and has labeled twenty-two of their malls as “Platinum Properties,” meaning the malls have luxury brand stores as tenants, including Tiffany, Lord & Taylor, Neiman Marcus, Saks Fifth Avenue and others.

Two years ago, General Growth reported they were an estimated $25 billion in debt. When they missed a $900 million repayment deadline, their lenders were in a position to issue a “notice of default,” forcing the company to seek protection from all of its creditors under Chapter 11 bankruptcy.

Unable to make a deal with its creditors, on April 16th of last year, General Growth Properties filed for Chapter 11 bankruptcy. It was the largest real estate bankruptcy since 1980. According to their bankruptcy filing, the company had roughly $29.6 billion in assets by the end of 2008 yet was $27.3 billion in debt.

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