Mall operator General Growth Properties Inc., which filed Chapter 11 bankruptcy in April with over $27 billion, has won the approval of its lenders to restructure $8.9 billion in shopping mall mortgage loans.
The lenders agreed to extend the due dates on the loans to between January 2014 and as far off as 2018. But in return, they will be getting back what they originally were owed, plus interest and other bankruptcy-related costs. In addition, General Growth will be held to stricter oversight on its loans, including a requirement that it beef up its reserves in certain conditions.
The due date extension is a sign that General Growth’s creditors have faith that the retail and real estate industries will rebound to its original profitability by 2014. But some analysts are sure that those industries will ever regain the value held during the bubble. General Growth’s repayment of debt in full is an unusual stipulation; but a possibly profitable move by General Growth which could actually benefit greatly if the malls survive and become profitable again by 2014. As a part of their bankruptcy agreement to repay creditors in full, General Growth will be allowed to retain the equity in the 70 malls that the agreement covers. The company is hoping to secure a similar deal in bankruptcy that would restructure $6 billion in mortgage loans on other shopping malls.
General Growth made history as the largest U.S. real estate bankruptcy case in history after filing Chapter 11 bankruptcy with over $27 billion of debt and 200 malls nationwide. Without the bankruptcy filing, the company would have been unable to survive and would have faced liquidation and closure.