General Growth's teachers investment OK'd

General Growth Properties Inc., the second-largest U.S. mall operator, won approval of a $500 million investment from a Texas public pension plan to help finance its exit from bankruptcy.

U.S. Bankruptcy Judge Allan Gropper in New York today approved a plan for the Teacher Retirement System of Texas to buy $500 million of shares in the reorganized General Growth at $10.25 a share.

"I will approve the agreement as a reasonable exercise of the debtors' powers under the bankruptcy code," Gropper said. There was no opposition to the investment.

The pension plan is joining Brookfield Asset Management Inc., Fairholme Funds Inc. and Pershing Square Capital Management LP to finance the Chicago company's exit from bankruptcy protection, which is set for October.

Under the plan, Brookfield, Fairholme and Pershing have agreed to buy $6.3 billion of stock in the reorganized company at $10 a share in addition to other commitments. The pension plan will hold a 4.9 percent stake in General Growth when it emerges from bankruptcy, and the other three investors will receive 62.8 percent before the exercise of warrants, according to court documents.

The Texas pension investment will reduce the other investors' total $8.55 billion investment by $500 million, lawyers for General Growth said.

The agreement approved today includes a $15 million breakup fee.

Under the agreement, General Growth can reduce the Texas teachers' investment by as much as 50 percent if more favorable financing becomes available.

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