GGP, Foothills Mall file Chapter 11

FORT COLLINS – The owner of the Foothills Mall filed for bankruptcy Thursday, ending months of speculation regarding the company’s ability to manage its debt.

Chicago-based General Growth Properties Inc. filed for Chapter 11 protection in U.S. Bankruptcy Court New York Southern District. Foothills and about 158 other shopping centers and other subsidiaries owned by the company also filed for Chapter 11. The filings will eventually be consolidated into one case.

GGP is claiming $27.3 billion in debts and $29.6 billion in assets. The single largest unsecured claim is for $1.987 billion by German property financier Eurohypo AG. Other large unsecured claims belong to Wilmington Trust, the Bank of New York Mellon and several retailers including Macy’s, Guess Inc., Borders Books and Music and Sephora. The retailers listed have unsecured claims of less than $2 million.

Chapter 11 bankruptcy sets up a “debtor-in-possession” situation in which the company continues to operate while it restructures its operations and debt with the goal of emerging as a solvent venture. GGP has secured post-petition financing of about $375 million from Pershing Square Capital Management LP to finance its operations while in bankruptcy.

“Our core business remains sound and is performing well with stable cash flows,´ said GGP CEO Adam Metz, in a statement. “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.”

The company’s bankruptcy comes after it failed to refinance its maturing debt in the collapsing credit market.

“Despite extensive efforts over many months to refinance or extend maturing debt, and attempts to sell certain properties to generate cash sufficient to satisfy mortgage debts as they mature, the company has been unable to do so because the commercial real estate finance markets have ceased to function and effectively are closed, even for loans on quality properties generating stable income,” according to the GGP Web site.

The bankruptcy will not affect daily operations at GGP’s 200-plus regional shopping malls.

“We are open for business as normal today,´ said Foothills General Manager Cynthia Eichler on Thursday. She was not able to comment any further on the bankruptcy proceedings, referring all inquiries to the GGP corporate office.

In a media conference call, Metz said he would not discuss specific divesture plans but that the company would sell “non-strategic properties.” Closures are not expected.

“We don’t anticipate that closing centers will be part of this operation,” he said.

Following the credit crisis that hit in the fall, the company did identify properties it could sell; however, buyers were not able to put together “meaningful proposals” due to the lack of credit availability.

In addition to Foothills, GGP’s Colorado properties include Park Meadows in Lone Tree, Southwest Plaza in Littleton and Chapel Hills Mall in Colorado Springs.

Park Meadows is one of about 70 centers that are not included in the bankruptcy filing. Properties not included in the filing were left out either because of joint partnerships in place or because the debt was not maturing in the near term.

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