General Growth stock falls

General Growth Properties Inc., the second-largest U.S. shopping mall owner, fell the most ever in New York trading after saying it may seek bankruptcy protection if plans to refinance $958 million in debt do not succeed.

General Growth slumped 88 cents, or 64 percent, to 49 cents in New York Stock Exchange composite trading. Today's decline was the biggest for the Chicago-based company since its April 1993 initial public offering of shares, and cost the company its place in the Standard & Poor's 500 stock index.

Investors have been dumping General Growth shares on concern the company won't be able to refinance its debt. It has lost more than 98 percent of its market value this year. The company's problems stem from its $11.3 billion purchase of Rouse Co. in 2004. Financed almost completely with debt, it left the company highly leveraged ever since, said Rich Moore, managing director at RBC Capital Markets in Cleveland.

``They took a big, big gamble, and it did not pay off,'' Moore said in an interview.

General Growth may not be able to refinance or reschedule the loans, due Dec. 1, because of the crisis in the credit markets, according to a filing the company made after the close of regular trading yesterday. It may also fail to rearrange $3.07 billion in debt maturing next year, General Growth said in the Securities and Exchange Commission filing.

CEO Replaced

Chief Executive Officer John Bucksbaum was replaced last month with interim CEO Adam Metz, and Chief Financial Officer Bernard Freibaum was fired after he sold 2.95 million shares to meet margin calls. Bucksbaum remains chairman.

General Growth also scrapped future development plans, and cut its forecast for 2008 funds from operations, excluding items, saying it expects to earn $2.85 to $2.95 a share. It had expected FFO of $3.42 a share. The company has also said it plans to sell malls in Las Vegas as part of a plan to raise cash.

Standard & Poor's today said it's removing General Growth from the S&P 500 after the close of trading tomorrow, saying the mall owner's stock-market value of about $128 million ranks it last in the index. General Growth will be replaced by drug developer Cephalon Inc., New York-based S&P said.

Telephone messages left today for Metz and Tim Goebel, investor relations director at General Growth, weren't returned.

``Our potential inability to address our 2008 or 2009 debt maturities in a satisfactory fashion raises substantial doubts as to our ability to continue as a going concern,'' General Growth said in yesterday's filing. The steps it may take include ``seeking legal protection from our creditors,'' the company said.

`Against a Wall'

While General Growth's statement that it may seek protection from creditors ``has been an obvious one to the market for some time, it is the first time that we can recall the company has put it in print,'' J.P. Morgan Securities Inc. analysts led by Michael W. Mueller said today in a note to investors. The company ``continues to have its back against a wall with massive near-term maturities in a credit crunch. We continue to recommend that investors not step in at current levels.''

Another risk for General Growth, the company said in yesterday's filing, is its low stock price. Should the company's shares remain below $1 each for 30 consecutive days, they could be delisted from the New York Stock Exchange. A delisting or threat of delisting could result in a default under certain debt facilities, General Growth said.

`Pressure Tactic'

RBC analyst Moore, who has an ``outperform'' rating on General Growth's shares, said he doesn't believe the SEC filing means the company is on the verge of filing for bankruptcy protection. Rather, Metz used the filing to both put pressure on creditors and alert investors to the risks confronting General Growth after the company's previous management team was criticized for not being ``as upfront as they could be,'' he said.

``What management did is to say, `Let's be real. This is what we're facing. If we don't get it done, there are going to be consequences,' '' Moore said.

General Growth is the largest U.S. shopping-mall owner after Indianapolis-based Simon Property Group Inc. General Growth said last week that its third-quarter net loss widened to $15.4 million, or 6 cents a share, from $9.4 million, or 4 cents, a year earlier.