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GGP Fails to Convince Bondholders, But Avoiding Bankruptcy For Now

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In a sign of the times, General Growth has not paid past-due debt and has not won an official extension from bondholders, but remains out of bankruptcy.

General Growth Properties Inc., struggling under a mountain of debt, said Monday that its latest effort to win a reprieve from bondholders had fallen short.

But a bankruptcy filing isn't imminent for the mall giant, according to people familiar with the matter, and General Growth's ability to remain out of bankruptcy shows the unusual dynamic between lenders and distressed companies in the recession-ravaged commercial-real-estate market.

Under normal circumstances a company with as much past-due debt as General Growth would have been forced into Chapter 11 bankruptcy protection by now. Creditors so far have been willing to let deadlines pass because they believe there is little to be gained and much to be lost through a bankruptcy. General Growth's mall operations are stable and many bondholders hope for a greater recovery outside of bankruptcy court.

"This is really rare," said Kevin Starke, an analyst at CRT Capital Group LLC, a research company that tracks distressed securities. "It is corporate-bond limbo like I've never seen before."

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Elaine Misonzhnik

Senior associate editor Elaine Misonzhnik has been writing for National Real Estate Investor since June 2006 and has covered commercial real estate for more than 12 years. She first became...
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