Wednesday, February 4, 2009

Loan Deadline Passes for General Growth

By KRIS HUDSON Debt-laden mall owner General Growth Properties Inc. has hit an unusual snag in its efforts to postpone debt payments and avert bankruptcy protection: It can't get an extension of a $225 million loan arranged by its primary advisor, Goldman Sachs Group Inc. The payment deadline on the short-term loan passed Monday without General Growth announcing an extension. It wasn't clear Tuesday what held up talks to postpone the payment deadline. Goldman, which General Growth added in September as one of three financial advisers, arranged the loan last fall to give the mall owner breathing room to pay several mortgages coming due and to sell assets to raise cash. Goldman has at least one unidentified partner in the loan who has balked at providing an extension, according to people familiar with the talks. Alamy General Growth's Faneuil Hall mall in Boston. The firm faces loan deadline. Goldman hasn't moved to foreclose on the malls pledged as collateral for the loan. If that were to happen, it would trigger cross defaults that could force General Growth to file for bankruptcy protection, people familiar with the matter say. The sides were in talks Tuesday to extend the loan. Representatives of General Growth declined to comment, as did a representative of Goldman. General Growth, based in Chicago, owns and manages more than 200 U.S. malls, including venues such as Water Tower Place in Chicago, Faneuil Hall in Boston and Ala Moana Center in Honolulu. If General Growth eventually files for bankruptcy protection, it would rank among the largest real-estate collapses in history. The impasse with the Goldman loan underscores the dire nature of General Growth's plight as it endeavors to avoid bankruptcy by persuading its lenders to postpone payment dates. The mall owner has warned in Securities and Exchange Commission filings that it might need to seek bankruptcy protection if it can't gain needed reprieves. It also has disclosed that it has little cash or borrowing capacity to pay chunks of its $27 billion debt load as they come due. General Growth has been through this before. Last December it went several days without an extension on a past-due $900 million loan before lenders agreed to a forbearance pact that effectively extended the deadline until March 15. General Growth executives also managed to delay payment dates until March 15 on a $2.6 billion credit line. Another $395 million in bonds come due for General Growth on March 16. In the interim, several smaller loans such as the Goldman loan could trip up the company and derail its bid to avoid bankruptcy. General Growth faces a $95 million mortgage on the Oakwood Center mall in New Orleans coming due on Monday. Oakwood Center was gutted by a fire after Hurricane Katrina in 2005, and, though rebuilt, it hasn't generated sales at its pre-Katrina pace. The mall may no longer be worth its mortgage amount. General Growth also has a $58 million mortgage coming due Feb. 11 and three mortgages totaling $347 million coming due March 2. The company is in talks with its lenders to postpone those deadlines. General Growth's stock closed at 75 cents, down 10 cents, or 12%, on Tuesday in 4 p.m. composite trading on the New York Stock Exchange. It has fallen 98% in the past year. Write to Kris Hudson at

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