Debt-riddled mall developer General Growth Properties Inc. (GGP), which is facing an uphill task to survive, has hired law firm Sidley Austin as bankruptcy counsel, reported Wall Street Journal late Wednesday. The company carries a staggering debt load of $27 billion.
Shares of General Growth Properties have lost 99% of their value thus far this year. In early 2008, General Growth Properties was trading in the $30-$40 range before the global financial turmoil led to a steep sell-off in the shares of the company.
In a SEC filing dated November 10, the company revealed that it has $900 million of property secured debt and $58 million of corporate debt that is scheduled to mature by December 1, 2008. The company also has an additional $3.07 billion of property and corporate debt that is scheduled to mature in 2009.
In its SEC filing, the company stated that it is working with its syndicate of lenders to extend the November 28, 2008 maturity dates for its property secured debt (related to Fashion Show and The Shoppes at The Palazzo, both in Las Vegas, Nevada).
Warning of an impending bankruptcy, the company stated that its potential inability to address its 2008 or 2009 debt maturities in a satisfactory fashion raises substantial doubts as to its ability to continue as a going concern.
Citing the continued weakness of the retail and credit markets, the company said there can be no assurance of obtaining extensions on the terms of the debt or refinance its existing debt or obtain the additional capital necessary to satisfy its short term cash needs on satisfactory terms.
Following the potential bankruptcy warning, General Growth cratered 64% on November 11 to close the day's trade at $0.49. Early this month, the company reported a wider loss of $15.4 million or $0.06 per share for its third-quarter, compared to a loss of $9.4 million or $0.04 per share in the year-ago quarter. Quarterly revenue declined 5.7% to $814.7 million from $864.2 million in the comparable quarter a year before.
Striving to refinance its pressing loans, the company had put three of its retail centers, the Fashion Show Mall, Venetian Grand Canal Shoppes, and the Shops at Palazzo, for sale in October. The same month, General Growth's CEO John Bucksbaum was replaced by board member Adam Metz. The company also named Thomas Nolan as interim president, replacing Robert Michaels.
According to the Wall Street Journal, a bankruptcy filing by General Growth "would rank among the largest real estate collapses in recent history". When Olympia & York Developments, once the world's largest privately held real estate developer, succumbed to bankruptcy in 1992, it had a debt load of $18.6 billion.
GGP closed Wednesday's trade at $0.40, down 14.89% on a volume of 15.89 million shares.
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