Fastest Growing & Innovative Companies
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By David McLaughlin
NEW YORK - General Growth Properties Inc., the parent company of Providence Place mall and the second-largest mall owner in the U.S., won court approval to proceed with its plan for a $2 billion stock offering after it emerges from bankruptcy.
U.S. Bankruptcy Judge Allan Gropper in Manhattan approved Friday an underwriting agreement that will allow General Growth to replace financing from a group of investors that has agreed to help fund its bankruptcy restructuring. The judge also approved a $1.8 billion commitment for debt financing.
Gropper said the financing agreements are an indication “of the enormous success” of General Growth’s turnaround while in bankruptcy.
Tom Nolan, General Growth’s president, said in an interview in court that General Growth intends to raise about $2 billion in the stock offering. That will replace half of the commitments from Fairholme Capital Management LLC, Pershing Square Capital Management LP and the Teacher Retirement System of Texas, Nolan said.
“There’s going to be a fair amount of demand for the stock,” he said.
Gropper’s approval of the underwriting comes as General Growth is nearing the end of its bankruptcy case, which began in April 2009. Later this month, it is scheduled to seek court approval for its restructuring plan, clearing the way for the mall owner to emerge from bankruptcy.
Under the equity commitments it lined up earlier this year, General Growth has the right to replace portions of the financing by selling, while in bankruptcy, notes that convert to shares or by a post-bankruptcy stock offering.
General Growth negotiated the underwriting agreement with Goldman & Sachs Co., Deutsche Bank AG, Wells Fargo Securities, RBC Capital Markets Corp., Barclays PLC, UBS Securities LLC, Macquarie Bank Ltd. and TD Securities (USA) LLC, according to court papers.
The U.S. Trustee’s office, an arm of the Justice Department that monitors bankruptcy cases, objected to UBS’s role as underwriter and lender. UBS is one of General Growth’s financial advisers and “suffers from disabling conflicts of interest,” the government said in a court filing yesterday.
“UBS Securities’ advice may be susceptible to claims that the advice is not unbiased in that UBS Securities may have, and may currently be perceived to be directing the debtors toward the direction where UBS Securities may earn the most fees,” lawyers for the U.S. Trustee said.
The objection was resolved during a closed-door meeting with the judge.
Howard Hughes Corp.
In a separate Bloomberg story, General Growth Properties Inc. said Bill Ackman will be chairman of Howard Hughes Corp., the spinoff that will consist of the company’s portfolio of master-planned communities and other real estate assets.
General Growth is separating its traditional retail properties from its master-planned community and commercial development operations. The spinoff includes New York’s South Street Seaport and Summerlin, a 22,500-acre Las Vegas community formerly owned by the estate of billionaire aviator Howard Hughes.
“The Howard Hughes name -- which reflects the success and vision of one of our country’s greatest entrepreneurs -- is a fitting brand for this world-class portfolio of real estate assets,” Ackman said in the statement.
Howard Hughes Corp.’s CEO will be announced after the spinoff is completed, General Growth said.