Taubman: "No Distessed Sales at General Growth" $$

There has been a ton of speculation out there that General Growth would be forced to dump holdings on the cheap, reducing the odds of equity preservation in the Chapter 11 process. This ought to dump some cold water on them…

When you take this and the recent TALF news, things are looking better for shareholders daily..

From Bloomberg:

“Even with a distressed owner of a good quality regional mall asset, you rarely, rarely see distressed pricing of those assets,” Chairman and Chief Executive Officer Robert S. Taubman said in a telephone interview. “If you’ve got a great one, no one’s going to want to sell an asset like that at a distressed price.”

General Growth (GGWPQ) filed for Chapter 11 bankruptcy protection last month after amassing $27 billion in debt during an acquisition spree that made it the second-largest U.S. shopping mall owner. Taubman’s comments echo those made last month by hedge-fund manager William Ackman, whose Pershing Square Capital Management LP owns about 25 percent of Chicago-based General Growth. Ackman said the probability of competitors “buying any of General Growth’s properties on the cheap is zero.”

It continues:

Taubman, whose Bloomfield Hills, Michigan-based company (TCO) has 24 regional malls, said the court likely will support a plan by General Growth management to keep the company’s portfolio together and emerge from bankruptcy without selling off a large number of properties.

“Maybe on the margin an asset will leak out,” he said in an interview from the International Council of Shopping Centers convention in Las Vegas, where his company is meeting with retail tenants. Even so, the predictable income offered by regional malls such as those in General Growth’s portfolio will attract buyers willing to pay the full price, Taubman said.

“There are enough buyers out there,” he said. “You’re never going to see a genuinely distressed price.”

This further bolsters to “asset” part of the equation in the eternal “are assets > liabilities” argument. It is key because depending on the structure of the 11 process, having assets > liabilities is key for shareholders remaining partly or totally whole when all is said and done.

Usual disclaimer. This is a highly speculative bet that depends greatly on the whims of the US legal system. You must be prepared to lose 100% (or close to it) in this investment before you invest. BUT, if we are right (I think we are)……..wow will it be good…

Disclosure (“none” means no position):Long GGWPQ, none