Like, say, “General Growth Partners?”
Well, at present, a lot of bankruptcy headache. It’s not exactly a surprise, as GGP, the massive mall manager, has been flirting with bankruptcy protection for some time now, but the devil is in the details. One of our least favorite is this: Bill Ackman holds about 25% of the firm and will provide $375 million in financing through the bankruptcy process. Ackman believes that the “equity will survive the process,” and he may be right, but he makes us so nervous we can barely stand still. First Target (we know, we know, the jury is still out on Target, we believe in you BA!), now this?
Ending months of speculation, General Growth, along with 158 of its more than 200 U.S. malls, filed for Chapter 11 protection from creditors while it tries to restructure some of its debt. Its joint-venture properties and third-party management business were not included in the bankruptcy.
The Chicago-based company, which owns such valuable malls as Fashion Show in Las Vegas and Faneuil Hall Marketplace in Boston, listed total assets of $29.56 billion and total debt of $27.29 billion.
Our fingers are crossed!
General Growth files for bankruptcy protection [Reuters]
Malls are glorious things. I am going to buy stuff in them? Forget it.
Oh EP…..it’s like you’ve gone to a reunion and discovered your schoolgirl crush has put on 50 lbs and installs drywall.
“Faneuil Hall”? that Martha Stewart broker is ballin’ outta control now!
the equity will survive this process??
Someone tell that to the bondholders who are trading bonds in the 30′s
One overlooked outcome of this bankruptcy… More Tom Friedman books. After all, he can no longer rely upon his wife’s family for money, so he’ll start churning books out as if his name was James Paterson.
Poorly Managed
General Growth Properties
The CDS auction for Rouse (Faneuil Hall and SouthStreet Seaport, etc) just settled at 28 cents on the dollar. That equity is a bagel.
“Oh EP…..it’s like you’ve gone to a reunion and discovered your schoolgirl crush has put on 50 lbs and installs drywall.”
HVAC, but yes. Oh, the horror! The horror!
Hey, some of my best friends are HVAC installers!
if one hearkens back to his quarterly letter (posted here, no?) and various GGP articles, don’t you worry EP. Ackman invested in GGP expecting, nay hoping, to take the company into bankruptcy.
Is Ackman losing it, or does he know something(s) that absolutely not another person on the face of this planet does?
He is losing it. When the unsecured trades in the 30s, the equity is toilet paper. If he expected bankruptcy, he wouldnt have bought equity.
Hedge fund Pershing Square Capital Management, one of General Growth Properties Inc’s GGP.N biggest shareholders, is betting the No. 2 U.S. mall owner will file for bankruptcy — and equity investors will end up big winners, a person familiar with the firm’s thinking said.
Pershing Square declined to comment. General Growth, whose top properties include Fashion Show in Las Vegas and Faneuil Hall in Boston, declined to comment.
Bankruptcy usually leaves stock investors with plenty of nothing, but General Growth is an unusual case. It has almost $30 billion of assets on its books, and just about $27 billion of debt.
But most of the company’s real estate assets are recorded on its books at their historical value, and many were bought years ago, meaning their value now is likely substantially higher. The company’s problems are not with its assets, but with refinancing maturing debt in frozen markets.
Historically, companies whose assets are worth much more than their liabilities have gone through bankruptcy in a way that leaves shareholders intact, which is what Pershing Square is banking on, the person familiar with the firm’s thinking said.
General Growth is not the first company to \find itself in this bind. Amerco Inc (UHAL.O), parent of moving truck rental company U-Haul International Inc, filed for bankruptcy in 2003 after a dispute with its former auditor and multiple accounting restatements left it unable to refinance debt.
The company listed $1.04 billion of assets and $884 million of liabilities in its bankruptcy filing, and had considerably more assets off its balance sheet as well. Its shares tripled during bankruptcy, and rose more than fourfold after it emerged from bankruptcy in 2004.
Pershing Square sees parallels between Amerco and General Growth. The founding families of both companies own substantial blocks of stock, giving them a real incentive to refrain from diluting shareholders’ stakes during bankruptcy.
And General Growth is still generating more than enough cash flow to service its debt and meet other day-to-day obligations, just as Amerco was. Pershing Square views General Growth as having trouble refinancing its debt due to broader difficulties in the commercial mortgage market in the weeks after Lehman’s Chapter 11 filing.
Not so handsome without enhanced liquidity, is he?
GGP’s consensus NAV is roughly $9.00 per share and they have very high quality assets. I doubt the equity will be completely wiped out.
With this title I thought you were going where the WSJ went today:
“Humble and hard-working, the Bucksbaums named their company General Growth –rather than using the family name — so that investors would find it in the stock tables between stalwarts General Electric Co. and General Motors Corp.”
Ironic since things are going so well for GM and GE. Maybe there is something in a name?
“I can’t believe no one mentioned that this is the company owned by Thomas Friedman’s wife. So how about the relentless upward drive of globalization and capitalism now?”
topset72
“This story keeps changing, but as I read it this morning, they financed(major billions) their aquisition of high end malls all with debt. Not a good move.”
back to the future
‘An examination of Gotham’s activities in recent years shows a series of ill-timed bets, a surprising lack of diversification and a dangerous concentration in illiquid investments that could not easily be sold when investors wanted their money back.’
http://www.nytimes.com/2003/01/19/business/a-rescue-ploy-now-haunts-a-hedge-fund-that-had-it-all.html?pagewanted=all
#16,
What was consensus NAV a year ago? And how did that work out? Nuff said.
8==D~~