General Growth Properties Chapter 11 Exit PlanGeneral Growth Properties Inc., announced that it has reached an agreement with Brookfield Asset Management Inc., Pershing Square Capital Management LP and Fairholme Capital Management LLC, to reorganize the second largest U.S. mall owner by infusing $6.55 billion into the company.

Brookfield, Pershing Square and Fairholme will commit $6.55 billion of new equity capital at a value of $15 a share to facilitate the company’s emergence from bankruptcy, General Growth said in a statement yesterday. The company will also issue warrants for 120 million shares exercisable at $15 a share, subject to approval in U.S. Bankruptcy court, according to the statement.

The financing plus a new $1.5 billion debt issuance would provide all the cash needed to fulfill the company’s capital needs, General Growth said.

Unsecured creditors would receive par plus accrued interest and existing shareholders would get 34 percent ownership in the reorganized company and 86 percent equity in a newly formed entity called General Growth Opportunities. The new company will own real estate properties, including South Street Seaport in New York, whole General Growth Properties will concentrate on shopping malls, according to the statement.

General Growth has already reorganized most of its property owning subsidiaries with approximately $14 billion out of $15 billion worth of property loans being approved for bankruptcy exit.   General Growth’s Chapter 11 bankruptcy has been complex but so far quite successful as it strategically navigates negotiations with both secured and unsecured creditors.  If the company’s Chapter 11 bankruptcy exit plan is approved, its unsecured creditors will emerge from the bankruptcy much better positioned than some of their counterparts involved in other bankruptcy cases.  During this recession, unsecured creditors ensnared in Chapter 11 bankruptcy cases have been walking away with nearly nothing and when they do walk away with a settlement, they have been forced to fight long battles to secure even the most miniscule concessions.

Consult a bankruptcy lawyer today