This is simply wonderful news for shareholders of General Growth Properties (GGWPQ) for a slew of reasons. First, the filing:
Again for those not inclined to read the whole document here is the applicable quote:
Prudential reaffirms that it is ready and willing to take concrete steps to reach understandings with Harbor Place, 1160/1180, and Rivertown Crossing with
respect to plan treatment and reiterates that the primary issues to be resolved – extension of maturities and establishment of new market interest rates
Since April I have tried to make the case here that the best scenario for all in this case was a cram down (the extension of debt at new interest rates) and that by doing the Chapter 11 that way, all parties are made as whole as possible.
This agreement by Prudential, should it come to fruition is just that AND gives us a road map for the remainder of the process, should the Judge see fit to go that way with it. It also now put pressure on other lender to follow suit lest they then worry about perhaps receiving an inferior deal down the road as the process unwinds.
What Prudential is seeking in the filing is to simply “get it done now” and understandably General Growth wants to extend the process in order to perhaps (this is my opinion here) come to similar agreements with other lenders. It is also possible that General Growth feels they may be able to obtain a better interest rate in Chapter 11 through a cram down (typically LIBOR + 1%-3%) than what Prudential is offering. None of this has been disclosed but Prudential’s request for a “market rate” interest rate I think may be the sticking point as the original loans were probably well below what a “market rate” would be in the current environment.
Either way, this is a huge move by a lender and the exact scenario I hope to see unfold on a much larger scale as this process moves forward…
Disclosure (“none” means no position):Long GGWPQ