Hughes heirs object to General Growth bankruptcy plan

The heirs of Howard Hughes moved to block General Growth Properties Inc.'s plan to exit bankruptcy, saying the second-largest U.S. mall operator is discriminating against them in the proposal.

General Growth's bankruptcy plan can't move forward because the heirs wouldn't receive the same recovery as the company's creditors or shareholders, they said in a court filing today in U.S. Bankruptcy Court in New York.

"There is no legitimate reason to provide the Hughes heirs with any other treatment, which is blatantly discriminatory and precludes confirmation of the plan," they said.

General Growth, based in Chicago, is scheduled to go to court next week to ask Judge Allan Gropper to allow its creditors to begin voting on the bankruptcy plan. The company hopes to exit bankruptcy by October.

The Hughes heirs' involvement General Growth's bankruptcy stems from the company's acquisition of the Rouse Co. in 2004. Rouse had acquired Hughes Corp. assets in 1996 and agreed to pay the heirs and other Hughes shareholders over time. General Growth assumed that agreement when it bought Rouse.

Under the bankruptcy plan, General Growth has several options for paying the heirs, including giving them a note issued by a company that General Growth plans to spin off, according to the heirs. The heirs said General Growth doesn't provide information about whether the spun-off company will be solvent.

David Keating, a General Growth spokesman, said he couldn't immediately comment.

General Growth's unsecured creditors also filed an objection to the bankruptcy plan today. They said terms of the proposal discriminate against them in favor of new investors that are financing the bankruptcy exit.

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