Big Shopping Mall Company Struggling to Avoid Bankruptcy

By Dana Hedgpeth
Washington Post Staff Writer
Tuesday, March 31, 2009

General Growth Properties moved a step closer yesterday toward a possible bankruptcy filing, analysts said, as the shopping mall owner continues to strive for a reprieve from bondholders.

The company, which has been struggling with debt since it bought Columbia-based Rouse five years ago, owns and operates more than 200 shopping centers.

The company amassed much of the $27 billion it owes by financing big acquisitions with debt. Its biggest bet came when it bought Rouse for $12 billion in 2004. It is late on about $2 billion in payments on its bonds. It has warned in financial filings that it may seek bankruptcy court protection if it can't work out a deal that gives it more time to pay off that debt.

General Growth said yesterday that it was trying to negotiate those extensions, but had not reached "the minimum acceptance levels" on parts of the deal. "We are grateful for the support we received from the holders of [Rouse bonds], and we are working with the [creditors] to address the credit crisis facing the company," Adam Metz, chief executive of the Chicago-based company, said in a statement. David Keating, a company spokesman, added in an e-mail, "We're still continuing conversations with our lenders."

In the Washington area, General Growth owns Tysons Galleria, Landmark Mall and Laurel Mall. It also owns eight malls in the Baltimore region, including The Mall in Columbia, Harborplace & The Gallery in Baltimore, Towson Town Center and Owings Mills Mall.

General Growth is trying to raise cash by selling some of its properties, including the Village of Cross Keys in Baltimore. The company has replaced its chief financial officer and suspended its dividend. Rating agencies have downgraded its credit ratings. The company's stock closed yesterday at 55 cents per share, down from a 52-week high of about $42.

The company was started in 1954 by the Bucksbaum brothers, who were grocers. It also owns Fashion Show in Las Vegas, Water Tower Place in Chicago and Faneuil Hall Marketplace in Boston. A group of General Growth's lenders -- led by Citigroup -- recently filed to foreclose on Oakwood Center, a mall in New Orleans, after a $95 million mortgage came due and wasn't paid, according to retail analysts.

Some retail analysts predict that the company is now teetering on declaring bankruptcy. If it does file, it would be among the largest real estate downfalls in U.S. history.

Steven Marks, managing director and head of the U.S. real estate investment trusts division at Fitch Ratings, said General Growth's

"decision to end its bid for a bondholder reprieve adds to [the company's] uncertainty," and said he had put the company on a negative watch list.

Jeffrey Spector, a real estate industry analyst with UBS, said it is likely that enough of the bondholders see "the credit markets are not opening up and the best chance of them recouping their money is to move to the next step, which is bankruptcy."

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