Fairholme Offers $2.7bn For General Growth Bankruptcy Exit

Pauline Renaud, March 2010

(11 March 2010)

Fund manager Fairholme Capital Management announced on Wednesday that it had offered to acquire about 271.3 million shares, or $2.713bn of new equity capital of the reorganised General Growth Properties Inc (GGP), therefore helping the company to emerge from bankruptcy protection.

William Ackman’s Pershing Square Capital Management and Fairholme indeed agreed to invest about $3.925bn together in General Growth under the proposal, explains Reuters. Brookfield Asset Management, Inc is also providing funding to help the company exit bankruptcy. Those different offers combined will provide General Growth with more than $6.5bn of committed equity capital.

In addition, Fairholme said it would provide $67.5m in connection with the $250m rights offering of General Growth Opportunities, a new subsidiary of GGP, at $5 per share. The fund currently holds about $1.83bn in face amount of General Growth’s unsecured debt. Fairholme has about $15bn under management.

General Growth, the owner and manager of more than 200 regional shopping malls in most US states, filed for bankruptcy protection in April 2009 with more than $24bn in debt. The company had been severely hit by a recession which continues to affect retail sales.