General Growth plans to submit their Chapter 11 bankruptcy plan next week to Bankruptcy Judge Allan Grooper and win his approval so they can exit bankruptcy by October. But if the heirs of Howard Hughes have their way, General Growth will need to go back to the drawing board and create a bankruptcy plan that offers the Hughes heirs a larger share of the pie.
The Hughes heirs' involvement in General Growth's bankruptcy stems from the company's acquisition of the Rouse Co. in 2004. Rouse had acquired Hughes Corp. assets in 1996 and agreed to pay the heirs and other Hughes shareholders over time. General Growth assumed that agreement when it bought Rouse.
Under the bankruptcy plan, General Growth has several options for paying the heirs, including giving them a note issued by a company that General Growth plans to spin off, according to the heirs. The heirs said General Growth doesn't provide information about whether the spun-off company will be solvent.
But the heirs of Howard Hughes say that the Chapter 11 bankruptcy plan unfairly discriminates against them in favor of the company's creditors and shareholders. They want a Chapter 11 bankruptcy plan that will guarantee them a share of a company that is profitable enough to honor the agreement General Growth took on when they purchased Rouse Co. in 2004. The Hughes heirs are not alone in challenging the General Growth bankruptcy plan; the company's unsecured creditors are also challenging the bankruptcy plan saying that the plan is unfair because it favors new investors that are financing the bankruptcy exit of General Growth.