The filing will impact only those properties General Growth owns and does not include those that are part of joint ventures or third-party-management. After analyzing each property individually, in total 158 regional shopping centers will fall under bankruptcy protection, while roughly 60 properties are exempt.

In a conference call, this morning Metz denied suggestions that the acquisition of the Columbia, Md.-based Rouse Co. in 2004 for $7.2 billion was the main reason for the bankruptcy filing. He said up until October 2008 the company had been able to pay off its debt; but when the credit crisis hit they ended up unable to make the repayments.

Metz was mostly silent about the ways General Growth would be restructured to begin to pay off its debt. A sale of assets, even some of the more iconic properties, is not out of the question. "It is not our ambition to be smaller," Metz said. "It is our ambition to have a portfolio that is valued by the market." He refrained from speculating about the number of locations of potential divestments but admitted the sale of "one or two" iconic buildings is not out of the question.

He said massive layoff were not in the plan, although the company is "constantly looking to make sure we are appropriately staffed." While Metz claims layoffs and a large number of sales will not be a major part of the restructuring plan, he refrained from saying what would be the key.

The court restructuring, which will begin with General Growth's first court appearance later this afternoon, will not be noticed by stores and their clients. "We are convinced we are going to make this bankruptcy filing invisible to our customers. We're open for business today and will be open for business tomorrow," Metz said.

Although Chapter 11 seemed inevitable, General Growth was still in talks with lenders as of earlier this month. At that time, the company had $1.12 billion in overdue debt. The company also has $4.1 billion in callable notes, according to Sam Chandan president and chief economist of Real Estate Economics LLC. Additionally, General Growth has $1.44 billion of consolidated mortgage debt and $600 million in unsecured bonds maturing in 2009.

In October, General Growth removed Bernard Freibaum as CFO. And while at the time, analysts believed it was the right thing to do it was also seen as too little too late. Later in October, as more of the company's debt came to light, the company moved around several top executives to replace the CEO and president. CEO John Bucksbaum will continue to serve as chairman and president Robert Michaels will move to COO, but Adam Metz will serve as interim CEO and Thomas Nolan Jr. has been named interim president.

By the middle of November, doubt swirled around the company as stock holders became uncertain about General Growth's growing debt. Stock fell more than 73% to trade as low as $0.33 per share. At the beginning of 2008, the company's stock traded at more that $41 per share.

Soon after the significant drop in stock prices, General Growth hired Sidley Austin as bankruptcy counsel to consider the options.

Talk of a bankruptcy filing heated up at the end of February when the REIT released its Q4 2008 financial results. It was at that time that General Growth said it had $1.12 billion is overdue debt and it was considering "all strategic alternatives and are continuing our discussions with our lenders."

Instant Insights /

General Growth Begins Court Restructuring

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