Judge Approves New Bankruptcy Loan For General Growth

A judge Thursday approved General Growth Properties Inc.'s (GGP) request to replace its current bankruptcy loan with a new, more interest-friendly one from Barclays Bank PLC (BCS, BARC.LN).

The Barclays financing, approved by Judge Allan Gropper of the U.S. Bankruptcy Court in Manhattan, replaces an existing $400 million loan from a group led by hedge fund manager Farallon Capital Management LLC, which last summer won a three-way fight for the right to provide the mall operator with debtor-in-possession financing.

The Barclays loan will mature on May 16, 2011, and includes an interest rate reduction that would save General Growth about $2.7 million per month. The loan will be initially issued by Barclays, and then later assigned to investors in General Growth's bankruptcy-exit plan. No parties objected to the new DIP loan.

General Growth, which owns or manages more than 200 U.S. shopping malls, filed for bankruptcy protection in April 2009. The company plans to exit Chapter 11 protection later this year under a plan backed by a group of investors led by Brookfield Asset Management Inc. (BAM, BAM.A.T).

The investors have agreed to pump $8.55 billion in General Growth, which would be split into two public companies upon its exit from Chapter 11 protection. One of the companies will get General Growth's more than 180 shopping malls, while the other will serve as a holding company for real-estate properties such as master-planned communities and mixed-use projects.

Gropper also ruled in favor of heirs of billionaire Howard Hughes in a dispute about how their claims should be valued. A lawyer for the Hughes heirs argued that appraisers, and not bankruptcy court, should be charged with valuing their claims.

The Hughes heirs' most lucrative claim is about half the value of 8,900 acres of undeveloped land in the Summerlin project, a planned community and housing development in Nevada, held by General Growth. The heirs say that land could be worth more than $1 billion, but General Growth has said it's worth far less.

The heirs are owed payments under a deal stemming from the Rouse Co.'s 1996 acquisition of the Hughes Corp. General Growth later acquired Rouse and assumed the obligations under that deal.

General Growth's lawyers argued that a court-controlled estimation process would be faster, and asked the judge to determine the value. "We think the estimation process provides a fair mechanism for doing it," said General Growth lawyer Adam Strochak of Weil, Gotshal & Manges.

Steven Hoort of Ropes & Gray, representing the Hughes heirs, said the Summerlin contract with Rouse Co. calls for a panel of three appraisers, and that the objections that would be filed in a court-run estimation process would bog the case down.

Gropper agreed, saying the court's job was to move the bankruptcy process along.

Hoort also disagreed with the involvement of the committee representing General Growth's shareholder, which has an appraiser, in the appraisal process. Gropper said he hoped that the equity committee could participate in the appraisal process, but wouldn't be forced to.

In ruling for the appraisal and adjourning General Growth's request for court-controlled estimation, Gropper said, "The Hughes heirs are hopefully happier claimants."

About the contract with Rouse, Gropper said, "It also seems to the court that it might be important for the debtors to follow the contract as precisely as possible."

The estimate that General Growth was asking for could eventually be used, Gropper said, possibly in conjunction with the appraisal process.

(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection.)

-By Joseph Checkler, Dow Jones Daily Bankruptcy Review; 212-416-2152; joseph.checkler@dowjones.com

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