General Growth Properties Inc. asked a bankruptcy court judge late Wednesday to approve a plan for its exit from Chapter 11 bankruptcy protection that gives the shopping mall giant until the end of the year to court buyout offers.
If approved by U.S. Bankruptcy Judge Allan Gropper in New York, the plan also would set a floor on offers for General Growth at $15 a share. That's higher than a $9 a share offer from rival Simon Property Group Inc. that General Growth rejected last month.
The move sets the stage for Simon, the nation's largest shopping mall operator, to potentially sweeten its $10 billion offer — something the company has been considering, according to two people familiar with the matter. They spoke on condition of anonymity because they were not authorized to discuss the matter publicly.
Investors have been anticipating as much, driving shares of General Growth more than $1 above the value of General Growth's proposed plan to $16.09 on Wednesday.
"The proposed transaction further builds on the tremendous momentum we have achieved in the bankruptcy process to address our capital structure and put the company on a solid financial foundation for the future," CEO Adam Metz said in a statement.
Despite being in bankruptcy protection for nearly a year, Chicago-based General Growth finds itself in the unusual position of courting buyout offers that promise to pay off creditors in full and give shareholders a premium over the current stock price.
General Growth is looking for a higher offer and has put forward a plan that calls for Canadian property manager Brookfield Asset Management Inc., Fairholme Capital Management and Pershing Square Capital Management Inc., to put up more than $6.5 billion combined to help General Growth emerge from bankruptcy as a standalone company.
The proposal, which would split General Growth into two companies, also would pay off unsecured creditors in full, General Growth said.
Fairholme is one of General Growth's largest unsecured creditors, while Pershing Square is one of its largest shareholders.
Gropper must also approve so-called bid protections that would compensate the investor group should General Growth sell the company to another bidder. Under the plan, General Growth will issue warrants to the investor group to buy 120 million shares of General Growth at an exercise price of $15 a share.
If approved, the warrants are good through Dec. 31, giving General Growth a time cushion should its efforts to exit bankruptcy drag on beyond this summer.
A bankruptcy court hearing on the matter is expected in late April.
General Growth operates more than 200 shopping malls in 43 states and is the nation's second-largest shopping mall operator. It sought shelter from creditors last April, resulting in the largest real estate bankruptcy in U.S. history.
To date, the company has restructured some $14 billion in secured debt and has about another $1 billion left to resolve, primarily on debt secured by two properties in Las Vegas, the Fashion Show mall and The Shoppes at The Palazzo.
Shares in Simon Property slipped $1.26 to $83.90 on Wednesday. Brookfield shares were unchanged at $25.42.
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