NEW YORK (Reuters) - General Growth Properties Inc GGP.N shares fell 64 percent on Tuesday after the second-largest U.S. mall owner expressed doubts it could keep operating due to looming near-term debt.
General Growth shares closed down 88 cents at 49 cents after reaching an intraday low of 33 cents on the New York Stock Exchange. Nearly a year ago, the shares traded as high as $51.24.
The Chicago-based retail property company has $1.13 billion in debt coming due, including $900 million in secured mortgage debt due November 28 on two of its Las Vegas shopping centers and $58 million of corporate debt on December 1, the company said in a U.S. Securities and Exchange Commission filing on Monday.
It also faces another $3.07 billion due next year, according to the SEC filing.
“In the event that we are unable to extend or refinance our debt or obtain additional capital on a timely basis and on acceptable terms, we will be required to take further steps to acquire the funds necessary to satisfy our short term cash needs, including seeking legal protection from our creditors,” the real estate investment trust said in the filing.
“Our potential inability to address our 2008 or 2009 debt maturities in a satisfactory fashion raises substantial doubts as to our ability to continue as a going concern.”
The company is negotiating with a bank group lead by Deutsche Bank AG DBKGn.DE to extend the $900 billion mortgage debt on the two Las Vegas properties.
Some of the banks participating in the Las Vegas loans are involved in the company’s unsecured term loan and the unsecured credit facility.
“So it’s a very tangled mess,” Green Street Advisors analyst Jim Sullivan said.
To raise cash, the company has put its Las Vegas malls, Fashion Show Mall, Grand Canal Shoppes and a mall in The Palazzo casino up for sale. General Growth would need to raise about $1.6 billion to pay off the upcoming maturities through April.
Depending upon the progress of a sale, the banks could extend the maturity.
“If GGP is moving forward with the sales process and the bank group believes that sales process is legitimate and will lead to a sale of those assets, then I think there’s an incentive to extend the loan,” Sullivan said.
But Grand Canal Shoppes and the Shoppes at The Palazzo are located in hotels owned by the Las Vegas Sands Corp LVS.N. Last week, the Sands' auditor raised doubts about it ability to continue as a viable company.
“That throws a real monkey wrench into things too,” Sullivan said.
About $595 million of the 2009 debt maturities are from unsecured bonds issued by Rouse Cos, an owner of upscale malls that General Growth bought in 2004. Those bonds are due in March and April.
In total, the real estate investment’s trust faces $22 billion of debt maturing by 2012.
Should the sales and loan negotiations fail and the company is forced to seek protection from creditors, which could include Chapter 11 bankruptcy protection, buyers may be able to get malls on the cheap because the price would be linked to satisfying lenders, not General Growth.
The winners of such as deal could be Simon Property Group Inc SPG.N, Westfield Group WDC.AX, Vornado Realty Trust VNO.N, Blackstone Group LP BX.N and real estate private equity player Colony Capital, Sullivan said.
“I think there’s a ton of money out there that would like to own a lot of these assets at the right price,” he said.
Representatives from those companies, General Growth and Deutsche Bank either did not return phone calls or declined comment.
At the end of the third-quarter, General Growth owned, managed or partly owned 200 large shopping malls and planned communities.
Additional reporting by Helen Chernikoff, editing by Andre Grenon, Dave Zimmerman
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