General Growth Wins 6 Month Extension…

This is a big win for General Growth Properties (GGWPQ). They now have control over the Chapter 11 process AND more importantly have increased leverage over lenders who want/need payments on debt to continue.

Here is the scenario:

GGP now has until the end of February to submit a plan. That means lender with billions in debt outstanding will be receiving nothing on that debt. GGP now has time on its side and lenders will be more willing to renegotiate loans on better terms to enable GGP to file its plan and resume payments before next February….

This is really good news…..

NEW YORK (Dow Jones)–A bankruptcy judge gave General Growth Properties Inc. (GGWPQ) a six-month extension to file its bankruptcy plan over opposition from a number of the mall owner’s lenders.

Judge Allan Gropper of the U.S. Bankruptcy Court in Manhattan extended the deadline for filing the reorganization plan to Feb. 26, rejecting calls from creditors for a shorter extension.

The extension granted by Gropper gives General Growth exclusive control over the path of its bankruptcy case by preventing creditors from filing rival reorganization plans with the court.

Marcia Goldstein, General Growth’s bankruptcy lawyer, said the Chicago-based mall owner will use the time to negotiate with lenders over a restructuring plan. General Growth filed for bankruptcy in April to lighten its $27 billion debt load.

“Six months is actually very ambitious. We hope to file the plan in this period” and negotiate an agreement with creditors, Goldstein told Gropper. “But that’s going to require a lot of work on multiple fronts.”

The six-month extension, she said, was reasonable for the largest real-estate bankruptcy case ever filed. She told Gropper there would be “chaos” if the court denied the extension because the company could face more than 100 rival plans from lenders to its malls.

Lenders and servicers – companies that handle defaulted loans to the malls on
behalf of lenders – objected to the six-month extension, saying it was too long. Most didn’t oppose an extension, but urged Gropper to approve a three-month extension, which they said would push negotiations forward.

But Gropper said General Growth’s bankruptcy case will be “in a better position” with the longer extension, and he noted that the company made a commitment to provide restructuring proposals to lenders soon.

“The goal should be to have a plan or plans proposed within the six-month period,” he said.

Disclosure (“none” means no position):LONG GGWPQ