Mall Owner General Growth Properties on Brink of Bankruptcy
Mall owner General Growth Properties is negotiating with bond holders in an effort to stay out of bankruptcy. Having defaulted on a $395 million dollar payment, it is crunch time for the company.
General Growth Properties owns and runs over 200 malls across the United States. The company is the second largest mall owner in the states. It owns such famous malls as Water Tower Place in Chicago. The failure of the company would be one of the biggest real estate based bankruptcies in history.
The current economic recession has hammered the retail industry. As sales have plummeted, the number of stores closing has shot up. Most malls cannot afford to have numerous empty stores, but that is exactly what they are facing. General Growth Properties is definitely not an exception.
General Growth is being pounded by bond payments coming due. It recently missed a $395 million payment and faces over $2 billion more in distributions over the next three years. The company is now facing $27 billion dollars in total debt, which means it is in a perilous situation as it tries to meet the debt obligations and pay bond holders all while dealing with the current economic crisis.
The company has not stuck its proverbial head in the sand. Instead, it has been negotiating with bond holders and debtors. The strategy is creative. The company is saying it will not pay the bond holders what they are due, but will instead pay them a flat fee not to demand payment on the debt instruments for the next few years. The idea is obviously to buy as much time as possible in hope the economy will recover and revenues will rebound.
The future of General Growth Properties looks dubious at best. Although the economy is showing some signs of turning around, the prospects for strong retail sales are iffy for the foreseeable future.