CHICAGO – General Growth Properties Inc. (NYSE: GGP), the cash-hungry company that owns or manages Providence Place and about 200 other malls nationwide, today announced the completion of a partial refinancing, signing about $896 million in mid-term debt. The new mortgage loans are slated to mature in five to seven years.
“The proceeds were fully used to retire a $58 million bond issued by The Rouse Co. LP” – corporate debt that had a maturity date of Nov. 28 but last week was extended to Dec. 11 – “as well as to refinance approximately $814 million of mortgage indebtedness scheduled to mature in 2009,” General Growth said.
But that leaves unresolved another $900 million in additional short-term debt that expires today. Those mortgage loans – secured by two Las Vegas malls General Growth has been trying to sell – also had been extended last week beyond their initial maturity date of Dec. 28. (READ MORE)
“The company is continuing discussions with its syndicate of lenders for a further extension of these two mortgage loans,” General Growth said. But, it acknowledged, “there can be no assurance that the company will obtain these further extensions.”
Last month, General Growth told the U.S. Securities and Exchange Commission (SEC) that it might have to seek bankruptcy protection if it were unable to obtain extensions or new financing for those short-term loans and another $3.07 billion of property and corporate debt scheduled to mature in 2009.
The real estate investment trust (REIT) has an ownership or management interest in 200-some regional malls in 44 states. It recently retained Sidley Austin LLP, a Chicago-based corporate law firm, to advise it as it seeks to raise capital and refinance its debt.
But local real estate analysts recently told Providence Business News that, even if the parent company fails, they expect Providence Place would continue to thrive. (READ MORE)
And Fitch Ratings Ltd. – which earlier this week downgraded its credit ratings for General Growth and its GGP LP and Rouse Co. subsidiaries (READ MORE) – today said that the risk to institutional investors also is low, at least in the near term.
“CMBS loans secured by GGP properties will not be impacted in the near term in the event of a corporate-level bankruptcy. The properties generally continue to maintain strong performance as dominant regional malls located throughout the United States,” the New York-based ratings agency said.
“A key factor limiting term default risk of CMBS loans in the event of a GGP bankruptcy is the strength of the current performance of the properties,” wrote Fitch Managing Director Eric Rothfeld. “More than 75 percent of GGP loans rated by Fitch have actual debt-service coverage ratios (DSCRs) greater than 1.50 times and 67 percent are greater than 2.0 times”
“’The likelihood for significant rating actions across transactions with GGP property exposure is slim given their strong performance, moderate leverage and the bankruptcy-remote nature of CMBS borrowers,” added Managing Director Susan Merrick. “However, longer term declines in property performance are possible if necessary capital used for property maintenance and renovation is limited and property management operations are affected by corporate financial stress.”
Fitch therefore will continue to monitor such transactions closely, the ratings agency said.
General Growth Properties Inc. (NYSE: GGP) – owner of Providence Place and the Silver City Galleria in Taunton and manager of the Swansea Mall – is a publicly traded real estate investment trust (REIT). GGP’s portfolio includes about 200 million square feet of retail space and more than 24,000 stores, as well as stakes in various master-planned community developments and commercial office buildings. Additional information is available at www.ggp.com.
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