GGP Seeks Court Approval of Reorg

This had been teased over the weekend and General Growth has now filed the papers to seek approval of the proposed plan to recapitalize and split the company. The text of the motion is here.

Update: The Wall Street Journal has a nice analysis of the offer and what it means in the broader struggle over General Growth's future.

The offer will be available to General Growth through year end if the Brookfield-led team is granted "stalking horse" status by a bankruptcy judge at an April 28 hearing, meaning the Brookfield offer would be the one other bids must beat, people familiar with the matter said.

That means General Growth still could pursue a competing offer prior to Dec. 31. If the rival bid doesn't pan out, General Growth then could return to the Brookfield offer on the same terms, these people say.

...

If Simon opts to sweeten its bid, it must do so within the next three weeks to be considered before the April 28 court hearing, people familiar with Simon's strategy say.

...

Aside from the Dec. 31 deadline, the documents outlining the Brookfield-led offer include no significant changes from the general terms disclosed earlier this month. Brookfield has pledged to provide $2.6 billion and Pershing and Fairholme a combined $3.9 billion to help General Growth. The mall owner would use that money to eliminate much of its $7 billion of unsecured debt and finance its emergence from bankruptcy.

In return, Brookfield, Pershing and Fairholme would collectively receive 630 million General Growth shares, or roughly 66% of the company's shares outstanding upon its exit from bankruptcy, not counting warrants that would be granted to the trio.

If the judge approves the Brookfield offer as the stalking horse, the Brookfield team also would receive 120 million warrants—60 million for Brookfield and 60 million for Fairholme and Pershing—allowing them to buy General Growth stock at $15 a share.

Text of General Growth's release below:

General Growth Properties Files Motion To Seek Approval Of Proposed $6.55 Billion Investment From Brookfield, Pershing Square and Fairholme

Proposed Transaction Provides Equity Capital at $15 per Share; Unsecured Creditors to Receive Par Plus Accrued

CHICAGO, IL (March 31, 2010) — General Growth Properties, Inc. (NYSE: GGP) today announced that it has filed with the U.S. Bankruptcy Court for the Southern District of New York definitive documentation related to the previously announced proposals from Brookfield Asset Management, Pershing Square Capital Management and Fairholme Capital Management. Under the terms of the agreements, Brookfield, Pershing Square and Fairholme will commit $6.55 billion of new equity capital at a value of $15.00 per share to facilitate GGP's emergence from bankruptcy. In addition, the Company will issue warrants for 120 million shares exercisable at $15.00 per share, subject to approval by the Bankruptcy Court.

GGP believes that this combined equity capital along with its anticipated new $1.5 billion debt issuance – or the reinstatement of a comparable amount of existing debt – would, if approved, deliver substantially all of the cash required to fulfill the Company's capital needs in connection with its emergence from bankruptcy. As part of the proposed transaction, GGP will form a new company, General Growth Opportunities (GGO), which will own a diverse portfolio of real estate assets, including the Company's master planned communities and landmark properties such as Ward Centers in Honolulu, Hawaii and South Street Seaport in New York City.

The proposed plan provides unsecured creditors with par plus accrued interest and, before taking into account the warrants, the existing shareholders with approximately 34 percent of the equity of reorganized GGP and 86 percent of the equity of GGO. As is typical in a bankruptcy process, GGP intends to continue to explore alternative transactions that may deliver greater value for the Company's stakeholders.

“This proposed transaction represents an important step toward our goal of creating the greatest value for all our stakeholders,” said Adam Metz, Chief Executive Officer of GGP. “It provides for a $6.55 billion investment at a value of $15 per share and par plus accrued recovery for unsecured creditors, while providing GGP with the flexibility to explore even better alternatives for an emergence transaction. Importantly, it allows GGP's existing equity holders to participate in the potential upside value of GGP and GGO, both of which will be better-capitalized companies operating in an improving economy. We have structured the proposed transaction to protect the rights of minority shareholders, including existing GGP equity holders, by establishing certain ownership limits and voting restrictions. The proposed transaction further builds on the tremendous momentum we have achieved in the bankruptcy process to address our capital structure and put the company on a solid financial foundation for the future.”

“The transaction we filed today will create two unique real estate companies, each with a strong strategic focus and attractive growth opportunities,” said Thomas Nolan, President and Chief Operating Officer of GGP. “General Growth Properties will concentrate on traditional shopping mall assets, including some of the most profitable and strongest properties in the country, and will benefit from GGP's recognized leadership in property management, high-quality operations and innovation. GGO will consist of a diverse portfolio of real estate assets with attractive long-term value-creation prospects.”

The full text of the motion can be accessed here.

As previously announced Brookfield Asset Management Inc. has agreed to invest $2.625 billion in a proposed recapitalization of GGP at a value of $15.00 per share. In addition, Fairholme has agreed to invest $2.8 billion and Pershing Square has agreed to invest $1.1 billion of new equity capital at a value of $15.00 per share. These proposed transactions provide GGP with long-standing commitments for a significant amount of equity financing, while preserving for the Company the option to replace up to $1.9 billion of the new equity capital to the extent it is able to raise equity capital on more attractive terms.