General Growth Properties Receives Proposal for $3.925 Billion in New Equity Capital from Fairholme Capital Management & Pers...
March 08 2010 - 9:19PM
Business Wire
General Growth Properties, Inc. (NYSE: GGP) today announced that
it has received a proposal from Fairholme Capital Management, LLC,
one of its largest unsecured creditors, and Pershing Square Capital
Management, one of GGP’s largest equity holders and a significant
unsecured creditor, in which Fairholme and Pershing Square would
commit $3.925 billion of new equity capital at a value of $15.00
per share to facilitate GGP’s emergence from bankruptcy. Together
with the previously announced $2.625 billion proposal from
Brookfield Asset Management, Inc., this proposal, if accepted,
would provide GGP with more than $6.5 billion of committed equity
capital. The Company believes that this combined equity capital
along with its anticipated new $1.5 billion debt issuance – or the
reinstatement of a comparable amount of existing debt – would, if
accepted, deliver substantially all of the cash required to fulfill
the Company’s capital needs in connection with its emergence from
bankruptcy and provide unsecured creditors with par plus accrued
interest in cash.
The GGP Board of Directors will study the proposal consistent
with its fiduciary duties. The proposal remains subject to approval
by the Board of Directors, approval by the Bankruptcy Court of
proposed fees in the form of warrants and higher and better
offers.
“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 Adam Metz, chief
executive officer of GGP. “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.”
In connection with the proposal, Pershing Square Capital
Management’s William Ackman has resigned from GGP’s Board of
Directors. “Bill Ackman has made significant contributions to GGP
during his time on the Board. We understand his decision to resign
to facilitate Pershing Square’s participation in this proposal,”
continued Mr. Metz.
Under the terms of the proposal, $3.8 billion would be used to
purchase shares of GGP stock at $10.00 per share, and $125 million
will be used to backstop the remaining portion of a $250 million
rights offering by General Growth Opportunities, a new company that
will own certain non-core assets, at a price of $5.00 per share.
Furthermore, the Company would have the right to reduce the $3.8
billion by $1.9 billion to the extent it is able to raise equity
capital on more attractive terms. The proposal from Fairholme and
Pershing Square is not subject to due diligence.
As previously announced, GGP reached an agreement in principle
with Brookfield Asset Management Inc., one of the world’s largest
real estate investors and asset managers, to invest $2.625 billion
in a proposed recapitalization of GGP at a plan value of $15.00 per
share and provide par plus accrued interest to unsecured creditors.
The proposed equity commitment from Brookfield is not subject to
due diligence and is subject to definitive documentation, approval
by the Bankruptcy Court of proposed fees in the form of warrants
and higher and better offers. The proposal is designed to maximize
value for all GGP stakeholders and enable a restructured GGP to
emerge from bankruptcy on a standalone basis with a diverse
portfolio of high-quality income-producing assets, strong cash flow
and a solid balance sheet capitalized principally with long-term
non-recourse debt.
ABOUT GGP
GGP currently has ownership interest in, or management
responsibility for, over 200 regional shopping malls in 43 states,
as well as ownership in planned community developments and
commercial office buildings. The Company’s portfolio totals
approximately 200 million square feet of retail space and includes
over 24,000 retail stores nationwide. The Company’s common stock is
traded on the New York Stock Exchange under the symbol GGP.
FORWARD LOOKING STATEMENTS
This press release contains forward-looking statements. Actual
results may differ materially from the results suggested by these
forward-looking statements, for a number of reasons, including, but
not limited to, the bankruptcy filings of the debtors, our ability
to refinance, extend or repay our near and intermediate term debt,
our substantial level of indebtedness, the Company’s ability to
implement a plan or plans of reorganization to emerge from
bankruptcy, our ability to raise additional capital though equity
issuances, asset sales or incurrence of new debt, retail and credit
market conditions, impairments, land sales in the Master Planned
Communities segment, the cost and success of development and
re-development projects and our liquidity demands. Readers are
referred to the documents filed by General Growth Properties, Inc.
with the Securities and Exchange Commission, which further identify
the important risk factors that could cause actual results to
differ materially from the forward-looking statements in this
release. The Company disclaims any obligation to update any
forward-looking statements.
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