NEW YORK General Growth Properties Inc's (GGP.N) reorganization plan was approved on Thursday, paving the way for the mall operator to exit bankruptcy a year and a half after it was brought to its knees under billions in debt it could not refinance.
General Growth said it expected to emerge from bankruptcy around November 8. It then would turn its attention to a $2.25 billion share sale to raise capital.
Shareholders often lose everything in a bankruptcy. Under the plan confirmed by U.S. Bankruptcy Judge Allan Gropper in Manhattan, all bond holders will be repaid and the 3,000 shareholders will get more than $5.2 billion of equity.
"This is an extraordinary case," Chief Executive Officer Adam Metz told Reuters after the hearing.
Chicago-based General Growth, the No. 2 mall owner after Simon Property Group Inc (SPG.N), was the only company to be reinstated on the New York Stock Exchange during bankruptcy, Gropper said.
General Growth will exit bankruptcy as two publicly traded companies.
The main company will retain the name General Growth Properties and about 185 properties, most of them malls and some mixed-use properties.
The other company, The Howard Hughes Corp, will house its master planned community business, land and shopping centers in development and other non-income-producing properties. It will trade under the symbol "HHC" on the New York Stock Exchange.
The company was solvent when it filed for bankruptcy protection on April 16, 2009. But it was unable to refinance large mortgage loans and corporate debt during the credit crisis. It was facing more $11.8 billion in maturing debt through 2012.
It traded as low as 48 cents per share the day it filed for bankruptcy. On Thursday, the stock closed at $16.93, down 2.5 percent.
Judge Gropper told the rest of the U.S. commercial real estate industry, "I urge you to avoid Chapter 11 and restructure out of court if possible."
The sector is facing $1.4 trillion in maturing debt though 2014.
Under the reorganization plan, investors led by Brookfield Asset Management Inc (BAMa.TO), and hedge funds Fairholme Funds Inc and Pershing Square Capital Management LP will put up $6.8 billion of new capital to fund the new company.
The Teacher Retirement System of Texas is investing $500 million. Blackstone Real Estate Advisors has agreed to invest $500 million in exchange for 7.6 percent of both companies, which will be derived from stakes held by Brookfield, Fairholme and Pershing.
General Growth last year was able to extend about $15 billion worth of property loans. But it had to deal with about $7 billion worth of corporate debt, most of which was inherited from Rouse Co., a mall and master-planned community company it bought in 2004.
It was able to get most of the bondholders to either take cash or reinstate their bonds. Additionally, bondholders such as Fairholme converted debt into equity in the new company, leaving the company with $1.6 billion in outstanding corporate debt when it emerges from bankruptcy.
With most of its corporate bonds reinstated, the company no longer needs a $1.5 billion term loan it had been ready to secure from banks. It has a $300 million revolving credit facility with nothing on its balance.
The shareholders of General Growth will receive the same number of shares in the new General Growth, when it emerges from bankruptcy, as they currently hold in the old company.
General Growth said on Thursday that holders of "old" General Growth shares as of November 1, will receive 0.0983 of a share of common stock of the new Howard Hughes Corp, on the day General Growth emerges from bankruptcy.
(Editing by Carol Bishopric)