Thoughts & Information on General Growth’s Chapter 11 Filing

It finally happened this morning.

Here is the 8-K Just filed:
General Growth 8-K

Here are the voluntary filings filed with the court

General Growth Properties’ Bankruptcy Filing

So, what to think.

* Liquidation is not happening. It would destroy the entire CRE market and take the banks down with it.
* GGP is current on its mortgages and has asked the bankruptcy court to allow them to remain current while reorganizing, this is a huge point as it goes to solvency vs seized credit markets
* The incentive for the banks is to be “made whole” on the debt. That give validation to the marks they currently carry on other CRE.
* Because of that, GGP’s plan to ensure that, will receive serious consideration from the court.
* This is not a typical Chapter 11 as the reason for reorganization is not due to a company that cannot pay bills, credit markets have cause extenuating circumstances. because of that, the “usual outcome” some assume must be discounted and other options receive more weight.
* There is legal precedent in 11 for equity remaining whole.
* Pershing and Bill Ackman. They have a stake in 25% of the equity, own debt and are the DIP financier. In other words, he will have a seat at every negotiating table as a large holder, that is more than a little significant

More after the call at noon today…

WSJ Article

Reuters Article

Disclosure (“none” means no position):Long GGP