Simon 'disappointed' in General Growth decision
The bankruptcy judge saw no reason to second-guess the business judgment of mall owner General Growth Properties Inc. and named a group composed of Brookfield Asset Management Inc., Fairholme Capital Management LLC and Pershing Square Capital Management LP to be the lead bidders in providing the equity-purchase and financing commitments underpinning a reorganization plan.
In picking the so-called stalking horse, General Growth passed up a proposal from shopping-center owner Simon Property Group Inc. that Simon said was worth $20 for each existing General Growth share.
Before the hearing on May 7, Indianapolis-based Simon said it wouldn't participate in the future "in any way" if it lost out to the Brookfield group. After the hearing, Simon issued a statement saying it had "withdrawn" its acquisition or recapitalization proposals.
General Growth's stock closed on May 7 at $14.07, down 11 percent in New York Stock Exchange composite trading. When the groups were informally bidding against one another, General Growth closed as high as $16.78 on May 3.
The bankruptcy judge approved a procedure where other investors can submit competing proposals by June 2. General Growth will consult with its creditor and stockholder constituents and pick the best proposal by July 2. The hearing for approval of a disclosure statement will take place July 30, with the confirmation hearing for approval of the plan to take place Sept. 30.
Simon said it was "disappointed" that General Growth picked another offer that had "substantially less value" for shareholders. General Growth said that the Brookfield group established a "floor price" for existing equity holders.
The Brookfield offer was further sweetened by deleting some of the warrants.
Absent a better offer in June, the Brookfield proposal will provide the financing for General Growth to complete a Chapter 11 reorganization of the holding company. General Growth already has bankruptcy court approval for Chapter 11 restructurings covering 107 of 108 mortgage loans for property-owning subsidiaries representing $14.8 billion in debt. Investments from Brookfield or Simon will finance a Chapter 11 reorganization plan where all debt at the parent level will be paid in full.
General Growth began the largest real-estate reorganization in history by filing under Chapter 11 in April 2009. The books of Chicago-based General Growth had assets of $29.6 billion and total liabilities of $27.3 billion as of Dec. 31, 2008. The company 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).