June 5, 2008 / 7:10 PM / 10 years ago

General Growth moves ahead to meet debt obligations

NEW YORK (Reuters) - The head of General Growth Properties Inc (GGP.N), the No. 2 owner of U.S. regional malls, said on Thursday the company is working on two financing deals to meet its debt that matures this year and about a third of what is scheduled to mature next year.

General Growth, which is one of the most heavily leveraged large real estate investment trusts, is working on securing a $1.75 billion term loan. It also is exploring creating a private commercial mortgage-backed securities bond deal.

“We are able to take care of all of our obligations,” John Bucksbaum, chairman and chief executive, said while speaking the National Association of Real Estate Investment Trusts Investor Forum in New York.

“Between the bank financing and we’re looking at the potential CMBS transaction, that goes a long ways to allay fears as to how one takes care of their obligations,” Bucksbaum said.

The bank deal will retire all but five of Chicago-based General Growth’s remaining maturities in 2008, Chief Financial Officer Bernard Freibaum said. The CMBS deal would take care of the rest and about 30 percent of the 2009 maturities, he said.

Three major banks have already given what the company refers to as “soft commitments” of up to $1.1 billion to fund the term loan, Chief Financial Officer Bernard Freibaum said.

The floating-rate term loan will be for a total of five years and will allow the company to pull out collateral property as other sources of commercial real estate lending return to the market.

The private CMBS deal pool could be as small as $1.5 billion and as large as $3 billion, Freibaum said.

CMBS bonds are securities whose payments come from pools of commercial mortgage principal and interest payments.

Last year, investment banks pooled mortgages and issued $230 billion worth of bonds, creating a cheap and efficient means for buyers to finance their purchases of office buildings, hotels, shopping centers, warehouses and apartments.

    But the credit crisis all but shut down the investment banks’ activities. So far this year only $10.9 billion have been issued.

    The private CMBS deal would take 90 days from start to finish and could be completed in the fourth quarter, Freibaum said.

    “It’s kind of like deja vu all over again,” Freibaum said.

    In 1997, before the CMBS market took off, General Growth put together its own package of 13 centers and formed what was the first single-issuer CMBS issue, he said.

    “A couple of investors called us that were in our 1997 package,” he said. “These investors said, ‘We’re pretty sure that a dozen or so of our peers -- in the aggregate we have billions of dollars that we want to put out -- would be very interested if you wanted to create bonds again.'”

    Editing by Brian Moss

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