General Growth Properties has an agreement to reorganize with $6.55 billion from Brookfield Asset Management, Pershing Square Capital Management and Fairholme Capital Management that will give the three investors a 65 percent stake in the second-largest U.S. mall owner.
General Growth filed a request in Manhattan bankruptcy court Wednesday seeking approval of the proposal April 29 as part of a procedure to auction itself to the highest bidder. The company also said it plans to file a plan of reorganization around July 2 and will give its stakeholders the chance to evaluate higher and better offers while avoiding risks from changes in the financial markets.
General Growth owns Park Meadows and Southwest Plaza in the Denver metro area, Foothills Mall in Fort Collins, and Chapel Hills Mall and Austin Bluffs Plaza in Colorado Springs.
The company will continue to explore other alternative deals, chief executive Adam Metz said in a separate statement.
“This proposed transaction represents an important step toward our goal of creating the greatest value for all our stakeholders,” Metz said.
The financing proposal will give Brookfield 26 percent ownership for its $2.625 billion investment, Fairholme a 28 percent stake for its $2.8 billion investment and Pershing an 11 percent stake for its $1.1 billion investment. The investors will be paid by receiving warrants, exercisable for 120 million shares at a price of $15 each.
Creditors would be repaid in full, and the transaction would give protection for minority shareholders, according to court documents. Brookfield’s investment is through an affiliate, REP Investments, separate from the Pershing and Fairholme investments. The investors won’t receive expense reimbursement, underwriting fees, breakup fees or any other form of compensation aside from the warrants, according to court documents.
The investors will seek an administrative-expense claim if General Growth goes with another offer, however.
General Growth said the proposal will let shareholders get upside if there is a better offer because the investors have agreed to commit money for nine months without requiring the company to commit to ever using their funds.
