General Growth Seeks Protection

From WaPo:

General Growth Properties, the giant shopping mall company whose holdings stretch from Tysons Corner to the planned community of Columbia and Baltimore's Inner Harbor, announced today that it has sought protection from creditors in bankruptcy court.

The company had been struggling for months to win relief from billions of dollars of debt, much of which is past due.

"All day-to-day operations and business of all of the Company's shopping centers and other properties will continue as usual," the company said in a news release.

General Growth, based in Chicago, had been trying to sell some of its landmark properties as it asked lenders to forgo debt payments, but amid recession and a credit crunch found little room to maneuver.

The bankruptcy filing could compound the woes of the banks and institutional investors that funded General Growth. By reducing the company's expenses and potentially slashing the price of its real estate, it could enable General Growth to undercut other owners and operators of shopping malls, contributing to the economy's downward spiral.

It also adds a new element of uncertainty to the future development of Columbia, where General Growth has been working on a long-term land use plan. General Growth years ago acquired Rouse, the pioneering developer of Columbia and of festival marketplaces around the country.

The company owns or manages more than 200 regional malls in 44 states, among other properties. Its holdings include Harborplace and the Gallery in Baltimore's Inner Harbor, Boston's Faneuil Hall Marketplace, Alexandria's Landmark Mall, Laurel Commons and Tysons Galleria.

One of the last straws for the company was a request days ago from a group of bondholders that the trustee for the bonds sue to enforce payment.

General Growth said it has lined up $375 million to fund its operations while in bankruptcy. The financing is from the hedge fund Pershing Square Capital Management, one of the firm's major investors.

General Growth's stock closed at $1.05 Wednesday, far below its 52-week high of $44.23.

The company's bankruptcy filing listed assets of $29.6 billion and debts of $27.3 billion.

Its major investors, directly or indirectly, include fund manager Vanguard Group and Fidelity's FMR LLC, according to the filing. Big creditors include the bank Eurohypo.

The big losers in the company's decline include its founding Bucksbaum family. As of March 23, chairman John Bucksbaum and other family interests held more than 2.6 million shares, according to a regulatory filing.

Bucksbaum was replaced as chief executive in October. The company also replaced chief financial officer Bernard Freibaum, who had been struggling with debts of his own. Freibaum sold almost 3 million shares in October to repay margin calls -- demands for repayment of borrowing -- and he was left with $3.4 million of margin debt, the company reported in October.

When Adam Metz, who had been the company's lead director, was named interim chief executive last fall at a salary of $1.5 million, the company promised him a "fixed bonus" of $2 million and the potential to earn an additional bonus of $1 million based on performance.

"While we have worked tirelessly in the past several months to address our maturing debts, the collapse of the credit markets has made it impossible for us to refinance maturing debt outside of chapter 11," Metz said today in a news release.

"Our core business remains sound and is performing well with stable cash flows," Metz said.