Simon Prop: General Growth agreement too secretive

Simon Property Group Inc. fired another salvo in the continuing war-by-press-release over its $10 billion takeover offer for shopping-center owner General Growth Properties Inc.

Complaining about overly restrictive terms in a proposed confidentiality agreement, Indianapolis-based Simon said in a Feb. 19 statement that General Growth has an "apparent interest in precluding our offer." Where General Growth contends it's working on a process to solicit offers in March, Simon called it a "charade" by "seeking to exclude the most logical" acquirer.

The General Growth creditors' committee sided with Simon in the dispute over the confidentiality agreement. In a statement, a lawyer for the committee called General Growth's version of a confidentiality agreement "excessively restrictive." The committee sees the Simon offer as an "excellent result" and "strongly" encouraged General Growth to "engage with Simon."

Specifically, Simon objects to provisions in a confidentiality agreement that would prohibit making an offer without General Growth's permission. Simon also wants the right to discuss the substance of discussions with the committees for creditors and stockholders. In addition, Simon objects to being precluded from having discussions with third parties.

Without coming to terms on a confidentiality agreement, Simon would be unable to examine confidential information about General Growth's financial condition. Simon said last week that it needs 30 days to study the information before it can make a binding offer.

General Growth said last week that it intends to implement a process so offers from third parties to underlay a reorganization plan can be made by the end of March.

General Growth directors were sued by shareholders in Illinois state court for failing to proceed with the Simon offer. To read Bloomberg coverage, click here.

General Growth's Chapter 11 case doesn't automatically prohibit lawsuits against officers or directors. Often, reorganizing companies will ask the bankruptcy judge to halt a suit outside bankruptcy court against company managers. In addition, General Growth might attempt to have the Illinois suit transferred to the bankruptcy court.

In three batches of confirmations in December and January, Chapter 11 plans were approved for property-owning General Growth subsidiaries having 111 loans representing $11.6 billion in debt. Last week, the bankruptcy court signed a confirmation order approving the reorganization for three more subsidiaries. Before last week's plan approvals, 35 properties with $3.3 billion in loans remained to be restructured. Similarly, the holding companies must reorganize their debt.

General Growth began the largest real estate reorganization in history by filing under Chapter 11 in April. The books of the Chicago-based company had assets of $29.6 billion and total liabilities of $27.3 billion as of Dec. 31, 2008. It owns or manages more than 200 shopping-mall properties.

The case is In re General Growth Properties Inc., 09-11977, U.S. Bankruptcy Court, Southern District of New York (Manhattan).