Wall Street Journal Article * NOVEMBER 11, 2008
Mall Owner Is Warning of Default
By BRIAN KALISH and KRIS HUDSON
Ailing mall owner General Growth Properties Inc. warned Monday in a government filing that its failure to refinance or extend $1 billion in debt due this month could trigger default on billions of dollars in debt and its ability to continue operations would be in "substantial doubt."
One of the nation's largest shopping mall owners, General Growth made the warning in a quarterly filing with the U.S. Securities and Exchange Commission. The company, based in Chicago, faces an additional $3.07 billion in debt coming due next year.
If General Growth cannot raise additional capital to pay off that debt or extend its payment deadlines, it would need to take additional steps to acquire needed funds, "including seeking legal protection from our creditors," according to the SEC filing.
General Growth has struggled for the past year to refinance and pay down a $27 billion debt load, amassed in acquisition sprees in recent years. The company owns more than 200 U.S. malls, including flagships such as Honolulu's Ala Moana Center and Las Vegas's Fashion Show mall.
General Growth's stock has declined by 97% in the past year as investors fret about its crushing debt. The stock closed Monday at $1.37, down 70 cents, in 4 p.m. composite trading on the New York Stock Exchange.
The company's board on Oct. 26 replaced Chief Executive Officer John Bucksbaum with lead independent director Adam Metz and replaced Bob Michaels as president with director Thomas Nolan. Mr. Bucksbaum remains chairman. Earlier in the month, the board replaced Chief Financial Officer Bernard Freibaum with accounting officer Edmund Hoyt on an interim basis.
General Growth has $900 million in debt coming due Nov. 28 on two luxury malls on the Las Vegas strip. It has another $58 million in bonds due on Dec. 1. The company is attempting to meet those obligations by selling those two malls as well as another on the Las Vegas Strip. It also is negotiating with its lenders to gain an extension on its deadline to pay those debts.
Given the continued weakness of the retail and credit markets, the company said: "There can be no assurance that we can obtain such extensions or refinance our existing debt or obtain the additional capital necessary to satisfy our short-term cash needs on satisfactory terms." In its SEC filing on Monday, General Growth warned that its stock could be delisted from the NYSE if it trades at less than $1 for 30 consecutive days. That could also trigger a default of certain of its debt facilities, according to the filing.
"These are standard disclosures for a company that is undergoing tremendous financial stress," said Jim Sullivan, an analyst with Green Street Advisors Inc. The share price "speaks to the gravity of their situation more than some legal language in an SEC document," he said.
Write to Brian Kalish at brian.kalish@dowjones.com and Kris Hudson at kris.hudson@wsj.com
