banner
Business

Streets at Southpoint mall operator files for bankruptcy

Posted April 16, 2009

General Growth Properties Inc., the nation's second-largest mall operator, filed for Chapter 11 bankruptcy protection early Thursday after it failed to persuade a majority of its debt holders to give it more time to refinance billions of dollars in debt racked up during the housing boom.

GGP (NYSE: GGP) operates The Streets at Southpoint mall in Durham.

Other GGP malls in North Carolina include:

  • Carolina Place, Pineville
  • Four Seasons Town Centre, Greensboro
  • Valley Hills Mall, Hickory
  • The Bridges at Mint Hill, suburban Charlotte

In a statement on its Web site, GGP stressed that its "Malls remain open."

The move by the Chicago-based real estate investment trust had been widely anticipated since the fall, when the company warned it might have to seek bankruptcy protection if it didn't get lenders to rework its debt terms. Efforts to negotiate with its unsecured and secured creditors ultimately fell short late last month.

"While we have worked tirelessly in the past several months to address our maturing debts, the collapse of the credit markets has made it impossible for us to refinance maturing debt outside of Chapter 11," Chief Executive Adam Metz said in a statement.

Chapter 11 protection typically allows a company to hold off creditors and operate as normal while it develops a financial reorganization plan.

The company had about $29.6 billion in assets and more than $27 billion in liabilities as of Dec. 31, according to documents filed with the U.S. Bankruptcy Court in the Southern District of New York.

The company noted that some subsidiaries, including its third party management business and joint ventures, were not part of the bankruptcy petition.

General Growth said it intends to reorganize with the aim of cutting its corporate debt and extending the terms of its mortgage maturities. It also said it will continue operating all of its shopping centers during the bankruptcy process.

The company said it received a financing commitment from Pershing Square Capital Management LP of about $375 million that General Growth expects to use to operate during the bankruptcy process.

General Growth, which has a stake in more than 200 malls across 44 states, has seen its fortunes sour as the U.S. economy worsened and the credit markets froze, leaving it hard-pressed to refinance the billions in debt the company took on during an aggressive expansion effort that included the $7 billion purchase of a competitor in 2004.

Last month, General Growth said it got lenders to waive default on a $2.58 billion credit agreement until the end of the year.

But its Rouse Co. subsidiary failed to convince enough holders of unsecured notes worth $2.25 billion as of Dec. 31 to accept a proposal that would let the unit avoid penalties for being behind on its debt payments and give it some time to refinance its debt load.

In February, the company reported lower-than-expected fourth-quarter funds from operations and a dip in revenue amid weaker retail rents.

The company has suspended its dividend, halted or slowed nearly all development projects and cut its work force by more than 20 percent. It also has sold some of its non-mall assets.

Its stock, meanwhile, which traded last spring as high as $44.23, has lost nearly all of its value in the past year, closing on Wednesday unchanged at $1.05.

47 Comments

This story is closed for comments.

Oldest First
View all
  • DougWare.NET Apr 16, 2009

    happymom is correct...

    Malls are huge tax generators. Sales tax, business taxes, property taxes, payroll taxes, retail permit fees...

    The list goes on and on...

  • superman Apr 16, 2009

    I am not surprised-- malls and shopping centers on every corner and in between. Most Americans has limited funds unless they have received a government bailout.

  • The Oracle Apr 16, 2009

    I gave an incorrect link for the e-commerce percentage of total retail sales. A link to the graph is at:
    www.census.gov/mrts/www/data/pdf/08Q2.pdf
    On line retail is still less than 4% of total retail sales.

  • Caveman93 Apr 16, 2009

    "How does a mall "fuel" an economy? They don't produce anything "

    They produce tax revenue. -happymom

    Seriously?

    Yes, seriously. People do actually pay taxes on what they buy. Plus, the businesses pay taxes. Seriously.

    My gosh you're right! People consume and buy things they don't really need and the taxes get collected to go to government! Government makes and creates the things we buy and sell so the only answer to fix things in this economy is to raise taxes more. Brilliant!

  • happymom Apr 16, 2009

    "How does a mall "fuel" an economy? They don't produce anything "

    They produce tax revenue. -happymom

    Seriously?

    Yes, seriously. People do actually pay taxes on what they buy. Plus, the businesses pay taxes. Seriously.

  • Ouaouaron Apr 16, 2009

    I have to theorize that most of the folks on here saying "bling is out" and "nobody will ever buy luxury items again" are either under 40 or ignorant. Go down to your library (or find an online source) and read the newspapers from around 1975 - 82. According to the "sages" back then, we're all supposed to be huddling over a dying ember of coal in the winter, Cratchit-style, with no lights, no cars and no life. The economy always has - and always will - run in cycles. China will get their comeuppance soon as well. Again, read those same papers and find out how "invincible" Japan was. Big wheel keeps on turnin'...

  • Caveman93 Apr 16, 2009

    "How does a mall "fuel" an economy? They don't produce anything "

    They produce tax revenue.
    -happymom

    Seriously?

  • happymom Apr 16, 2009

    "How does a mall "fuel" an economy? They don't produce anything "

    They produce tax revenue.

  • haggis basher Apr 16, 2009

    They didn't go into chapter 11 because they were losing money, they just could not get their loans refinanced due to problems in the banking industry.

  • Devilsadvocate Apr 16, 2009

    I made sure to use up the rest of my GGP mall gift card today!

More...