Saturday, December 13, 2008

General Growth Gets a Breather on Some Debt

General Growth Properties Inc. scored a victory in its struggle to manage its $27 billion debt load by refinancing several mortgages coming due, but the mall owner still was negotiating Friday to extend the deadline on a $900 million loan due at midnight. View Full Image Reuters The Shoppes at the Palazzo mall is among the properties General Growth is putting up for sale after a bid to raise capital fizzled. General Growth gave itself some breathing room by retiring $58 million in bonds and refinancing $814 million in mortgages due in 2009. The mortgages and retired bonds were held by a retirement system, according to people familiar with the matter, who declined to identify the debt holder. The company landed $896 million in new debt from that retirement system to replace the mortgages coming due next year as well as the $58 million in bonds, which were due Thursday. The new mortgages, which gave General Growth an extra $24 million in cash likely used to cover fees and closing costs, aren't due until 2013 to 2015. A General Growth representative declined to divulge terms of the new debt. General Growth shares, which have fallen 96% this year, rose 36 cents, or 25%, to $1.80 in 4 p.m. composite trading on the New York Stock Exchange. Earlier in the day, they were up 73% on the refinancing news. General Growth's refinancing success also boosted the entire real-estate sector, which has seen sharp losses partly due to uncertainties over whether credit will be available next year. The Dow Jones Real Estate Investment Trust index rose 10.8% Friday, strongly outperforming the broader market. But challenges remain for Chicago-based General Growth, which owns and manages more than 200 U.S. malls. It still has $2 billion in debt coming due next year and $4.5 billion due in 2010. The most pressing concern is a $900 million bank loan on two luxury malls on the Las Vegas Strip -- Fashion Show mall and the Shoppes at the Palazzo -- that was due at midnight Friday. As of Friday afternoon, the company had yet to announce an extension of that deadline. Even if the deadline passes without a pact, General Growth isn't in default on the loan unless the banks declare it so, so it could continue negotiating with its banks through the weekend. Late last month, General Growth sought a nine-month extension from the banks, which include Citigroup Inc., Eurohypo AG, Deutsche Bank AG and four others. But it only got a two-week extension until midnight Friday, largely because of hardball tactics by Citigroup, according to people familiar with the matter. Citigroup has declined to comment.

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