GGP Continues to Rework Debt

Yesterday, General Growth Properties, Inc. (GGP - Analyst Report) announced that it had extended the expiration date to receive consent solicitation from bondholders until March 20th. The origination solicitation expired on Monday, March 16th. GGP is seeking solicitation consent from bondholders on $2.25 billion of notes. GGP is asking bondholders to extend the maturity on bonds due in March and April.

In addition, the company is asking bondholders on these notes and 3 other issues to forgo interest payments through the end of this year. Interest will be accrued and added to principle. The company needs approval of 90% of holders of the 2009 bonds and 75% approval from the 3 other issues.

The company indicated that only 41% of 2009 bondholders have agreed so far. $395 of bonds matured on March 15th, so the company is now technically in default on these issues. GGP is also in default on a $1.51 billion secured portfolio facility and a $225 million short-term loan covering multiple properties.

GGP also announced yesterday that lenders had agreed to waive default on a $2.58 billion credit agreement until at least the end of this year, but this is contingent on the bondholders agreeing to terms.

GGP is most likely headed for bankruptcy. The one thing that shareholders have going for them is the reluctance of lenders to let GPP go under and the mess that a bankruptcy would create. Although, retail fundamentals are rapidly deteriorating, and the retail economy will get worse in 2009. It is likely that lenders will lose their patience and stop extending debt.