Saturday, November 01, 2008

An Uncertain Future

General Growth Properties is on the ropes. In his column in The Sun today, Jay Hanock summarized the depth of the companies’ financial distress.

“It faces a balloon payment of nearly $1 billion, due Nov. 28, which it doesn't have the cash to pay and which it will have extreme difficulty refinancing in this credit market.An attempt to sell up to $2 billion in preferred stock flopped. Hence the need to sell malls, quick.”

And it’s not just the malls for sale either. The company openly acknowledges that anything and everything is for sale.

"We're certainly happy to discuss other properties" with qualified buyers, General Growth spokesman Jim Graham said. "We've had plenty of inquiries about properties all over the country."

Ironically, that may prove to be the company’s ultimate redemption. GGP isn’t the only one trying to unload real estate to raise cash these days, particularly retail real estate. It’s a great time for the few buyers too. Everyone is bottom feeding. No one is going to pay the true value of these assets right now. It may be in GGP’s creditors’ best interest to renegotiate with GGP rather than put them in default. They would stand a better chance of being made whole on their loans if they allow the company to get through this period than they would if they force the company into bankruptcy.


Tom said...

"Isn't this what Chapter 11 bankruptcy is for? I'll bet that happens before 10/28 if GGP can't come up with the $$.