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General Growth succumbs to bankruptcy

The US’ second largest mall owner, burdened with $27.3bn of debt, has ‘reluctantly’ filed for Chapter 11 bankruptcy protection after unsuccessfully trying to refinance its loans out of court. The REIT has obtained $375m of DIP financing from investment firm Pershing Square to continue operations.

Chicago-based General Growth Properties and 158 of its shopping malls have filed for bankruptcy protection after failing to refinance or extend their maturing debt. 

The REIT first raised the prospect of bankruptcy back in November as it desperately sought to rebalance its $27.3 billion debt load.

The US’ second largest mall owner, which owns more than 200 malls across the US, including the Fashion Show Mall and the Shoppes at the Palazzo in Las Vegas, said in a statement that despite months of negotiations it had been unable to reach a consensus with its lenders. “The company reluctantly concluded that restructuring under the protection of the bankruptcy court was necessary.”

General Growth added that it intended to extend mortgage maturities and reduce its corporate debt and overall leverage.

Among General Growth's biggest creditors are the banks Eurohypo, Wilmington Trust and Bank of New York Mellon, which are owed approximately $6.5 billion, according to Reuters. 

The bankruptcy filing comes after the firm earlier this month was unable to restructure the bonds of The Rouse Company, a publicly-listed shopping mall developer purchased by General Growth in 2004, due to insufficient support from the lending syndicate.

The company currently has total assets of $29.6 billion and total debt of $27.3 billion.

New York-based investment firm Pershing Square Capital Management has committed $375 million of debtor-in-possession financing to General Growth during the chapter 11 process. The REIT expects to receive approval to make payments allowing its shopping centres and other properties to operate without interruption.

The struggling REIT suspended its cash dividend, halted or slowed all development projects, cut 20 percent of its workforce and sold certain non-mall assets in a bid to reduce its debt before filing for bankruptcy.