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updated: 2/24/2010 6:30 PM

General Growth inks deal to exit bankruptcy

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  • General Growth Properties Inc., owner of Spring Hill Mall in West Dundee, plans to split itself into two companies and receive $2.63 billion in capital from Brookfield Asset Management Inc. as it works to exit bankruptcy.

      General Growth Properties Inc., owner of Spring Hill Mall in West Dundee, plans to split itself into two companies and receive $2.63 billion in capital from Brookfield Asset Management Inc. as it works to exit bankruptcy.
    Patrick Kunzer | Staff Photographer

 

LOS ANGELES -- The nation's second-largest shopping mall operator General Growth Properties Inc. said Wednesday it reached a deal with Canada's Brookfield Asset Management Inc. that will speed its exit from Chapter 11 bankruptcy protection.

Speculation raged for weeks that General Growth might turn to Brookfield, which has been looking to expand its slate of U.S. retail properties and last year acquired an undisclosed stake in the company.

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General Growth, in turn, could thwart last week's $10 billion takeover bid from Simon Property Group Inc. The No. 1 shopping mall operator controls some 382 properties worldwide.

General Growth rebuffed the unsolicited offer from Simon for being too low.

A Simon spokeswoman didn't have an immediate comment.

General Growth owns or manages 200 shopping malls in 44 states. The company racked up $27 billion in debt by the time it sought shelter from creditors last April, making it the largest real estate bankruptcy case in U.S. history.

Last year, the company restructured more than $13 billion in secured debt, which enabled 108 of its properties to emerge from bankruptcy.

As part of the new plan, General Growth would spin off some assets as a new company named General Growth Opportunities, which would essentially hold assets the company concedes aren't producing much income currently, including the company's master planned communities and some large retail hubs, such as the South Street Seaport in New York.

"This proposed plan offers significant value for all of our stakeholders," said General Growth CEO Adam Metz.

The pact with Brookfield would allow General Growth to raise the money it needs to pay off some $7 billion in debt and interest to its creditors. Stockholders would get $15 a share.

Brookfield is majority owner of Brookfield Properties Corp., one of the biggest owners of office properties in the world. Brookfield would invest $2.6 billion in cash in exchange for General Growth shares. That would give Brookfield a roughly 30 percent stake in General Growth and the right to nominate three directors to the board.

The agreement is subject to approval by a bankruptcy court judge, and creditors and shareholders. A hearing is set for Monday.

Shares in Chicago-based General Growth slipped 8 cents to $12.89 Wednesday. Shares in Indianapolis-based Simon, fell 38 cents to $77.53, while Brookfield shares dipped 5 cents to $22.79.

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