MercoPress. South Atlantic News Agency

US second largest shopping mall owner files for bankruptcy protection

General Growth Properties, United States second-largest shopping mall owner filed for Chapter 11 bankruptcy protection on Thursday after failing to reach an out of court consensus on how to restructure its 27 billion US dollars debt. The Chicago based corporation which owns more than 200 malls in 44 states said shoppers at its malls will not be affected by its bankruptcy filing.

The company has been unable to refinance much of its debt leaving it with no option but to head to the courts. GGP said that approximately 158 regional shopping centres owned by GGP and certain other GGP subsidiaries have also filed for protection.

According to market analysts the company finds itself paying the price for its aggressive expansion at the height of the real estate boom. As the credit crisis hit and the US consumer started saving more and spending less, the company's retail clients felt the pinch, which flowed through to General Growth in the form of retail store closings and bankruptcies.

GGP intends to pursue a plan of reorganization that extends mortgage maturities and reduces its corporate debt and overall leverage. It has received a commitment for a debtor-in-possession financing facility of approximately 375 million US dollars from Pershing Square Capital Management.

“Our core business remains sound and is performing well with stable cash flows. We believe that chapter 11 is the best process for restructuring maturing mortgage loans, reducing the Company’s corporate debt, and establishing a sustainable, long-term capital structure for the Company,” said Adam Metz, Chief Executive Officer of the Company.

“While we have worked tirelessly in the past several months to address our maturing debts, the collapse of the credit markets has made it impossible for us to refinance maturing debt outside of chapter 11,” he added.

The move by the General Growth had been widely anticipated since the fall, when the company warned it might have to seek bankruptcy protection if it didn't get lenders to rework its debt terms. Efforts to negotiate with its creditors ultimately fell short late last month.

Chapter 11 protection typically allows a company to hold off creditors and operate as normal while it develops a financial reorganization plan.

GGP has suspended its dividend, halted or slowed nearly all development projects and cut its work force by more than 20 percent. It also has sold some of its non-mall assets.