Thursday, April 16, 2009

Down but Not Quite Out

The announcement today that General Growth Properties has filed for Chapter 11 bankruptcy protection comes as no surprise to anyone who has been following the company’s financial travails. Two days ago I posed the question as to whether a bankruptcy filing was imminent given the mounting pressure being exerted on the company by certain bondholders.

At least we now know the answer to that question.

So what does all of this mean for Columbia?

Frankly, I really don’t know. What I do know is that a bankruptcy filing is exactly what GGP’s largest shareholder, Pershing Capital, has been pushing for over the last six months. Pershing Capital is the investment vehicle of William Ackman. He believes GGP is worth more in bankruptcy than out. According to this story from last week in Seeking Alpha, a GGP bankruptcy can be beneficial to the shareholders. In this post from Todd Sullivan, Ackman was quoted from a recent REIT symposium:

"Bankruptcy is also designed for companies that are solvent, but have liquidity problems that are due to events outside of their control,"...

"It's one of the most interesting investment opportunities I've seen in my career," he said.

"I've learned that, when a solvent company files for bankruptcy and you have a lead equity holder, you can marshal it thorough the bankruptcy process," Ackman said.

It remains to be seen how this will affect GGP’s Columbia holdings.

Stay tuned.

5 comments:

Anonymous said...

The Ulman statements in the press were misinformed.

There are plenty of Columbia holdings involved in the filing.

Anonymous said...

There's a good take on this over at Columbia 2.0:

http://www.columbia2point0.com

Anonymous said...

I can't see that site. Do they say that it's of no consequence or are they providing information like the holdings which are affected?

The Gonzo Journalist said...

Dude . . . you can predict the future?

I have to know, what is the next stage of human evolution; humans with gills or cockroach-like resistance to nuclear radiation?

Somehow, I don't think Thomas D'Alesandro will grow gills.

wordbones said...

Anon 12:41 PM & Anon 1:13 PM,

The major Columbia holdings of GGP such as the mall and the bulk of the undeveloped land are not included in the bankruptcy. Some other holdings including something called HRD Parking and another one called HRD Remainder are included.

-wb