Mall operator General Growth Properties, Inc. (GGP) emerged Tuesday from Chapter 11 bankruptcy protection after 19 months following the successful completion of the final steps of its financial restructuring, ending one of the largest and most complex bankruptcy cases in U.S. corporate history. The company split itself into two separate publicly traded companies and commenced a public offering for New GGP common stock.
"Today marks the successful end of one chapter in GGP's history and the beginning of another. Over the past nineteen months, we have taken extraordinary steps to remake GGP's entire financial structure while at the same time refocusing our operations across all of our shopping mall properties," CEO Adam Metz.
Chicago-based GGP sought Chapter 11 bankruptcy protection in April 2009 after failing to refinance portions of its $27 billion debt as they came due, filing the biggest real-estate bankruptcy in U.S. history. The company was was unable to refinance its business due to the financial crisis following the collapse of the mortgage- backed securities market.
As part of the financial restructuring, the company restructured about $15 billion of project-level debt tied to about 140 properties and recapitalized itself with $6.8 billion in new equity capital. It also paid all creditor claims in full and achieved substantial recovery for equity holders. The recapitalization was provided by an investor group led by Brookfield Asset Management, Inc. (BAM, BAM-A,TO).
Under the restructuring, GGP has now split itself into two separate and independent publicly traded corporations upon emergence from bankruptcy, with current GGP shareholders, as of the record date of November 1, 2010, receiving common stock in both companies.
The new GGP will commence trading on The New York Stock Exchange on Wednesday under the ticker symbol "GGP". The spin-off company, Howard Hughes Corp., will also trade under the ticker symbol "HHC" on The New York Stock Exchange.
The new GGP will remain the second largest U.S.-shopping mall owner and operator after Simon Property Group, Inc. (SPG) by number of properties, with continued interest in more than 183 regional malls in 43 states, and focusing on largely stable, income-producing shopping malls and other real estate assets.
The New GGP has also agreed to elect to be treated as a real estate investment trust, or REIT, for U.S. federal income tax purposes in connection with the filing of its tax return for 2010, subject to satisfying the REIT qualification requirements at such time.
The spin-off new company, Howard Hughes Corp., will consist of GGP's portfolio of master planned communities and other strategic real estate development opportunities.
William Ackman would be the Chairman of the spun-off company. Ackman is the founder and CEO of Pershing Square Capital Management, L.P. and a director of GGP from June 2009 to March 2010.
In late October, GGP also appointed Sandeep Mathrani as the new chief executive officer of new GGP, effective at the beginning of 2011. Mathrani, a real estate industry veteran with over 20 years of experience, succeeds Adam Metz, who served as CEO during GGP's bankruptcy process. Mathrani spent 8 years each with the retail real estate division of Vornado Realty Trust (VNO), as well as Forest City Ratner.
Separately, New GGP also announced the commencement of a public offering of 135 million shares of its common stock at about $14.00 per share. The underwriters have been given an option to purchase an additional 20.25 million shares of common stock from the company at the offering price, less the underwriting discounts.
The company noted that the net proceeds from the offering after expenses of about $1.8 billion to $2.1 billion will primarily be used to repurchase part of its stake from the investor group led by Brookfield.
Following the repurchase of stake, the new GGP will be 24.6% owned by Brookfield, 14.1% by Bruce Berkowitz's Fairholme Funds, Inc., 7.7% by Bill Ackman's Pershing Square Capital Management , 5.1% by The Blackstone Investors, and 2.6% by Teacher Retirement System of Texas.
GGP closed Tuesday's regular trading session at $17.39, down $0.41 or 2.30% on a volume of 3.45 million shares, higher than the three-month average volume of 2.07 million shares. In the past 52-week period, the stock has been trading in a range of $12.23 to $18.27.
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