Fairholme, Pershing Pledge $4B to Renew GGP

Together with the previously announced $2.6-billion proposal from Brookfield Asset Management Inc., this proposal, if accepted, would provide GGP with more than $6.5 billion of committed equity capital. According to a statement from the REIT, the trust believes that this combined equity capital along with its anticipated new $1.5-billion debt issuance--or the reinstatement of a comparable amount of existing debt--would, if accepted, deliver substantially all of the cash required to fulfill the Company's capital needs in connection with its emergence from bankruptcy and provide unsecured creditors with par plus accrued interest in cash.

This move had been anticipated, as the offer from Brookfield included a clause for such a large capital deliverance. Indianapolis-based Simon Property Group had criticized Pershing's William Ackman, who is also on the GGP Board of Directors, for making overtures toward the Brookfield plan. Ackman has now resigned from the GGP board, and will help facilitate Pershing's proposal, said GGP officials in the statement.

Under the terms of the Fairholme-Pershing proposal, $3.8 billion would be used to purchase shares of GGP stock at $10 per share, and $125 million will be used to backstop the remaining portion of a $250-million rights offering by General Growth Opportunities, a new company that will own certain non-core assets, at a price of $5.00 per share. Furthermore, GGP would have the right to reduce the $3.8 billion by $1.9 billion to the extent it is able to raise equity capital on more attractive terms, according to trust officials in the statement. "The proposal from Fairholme and Pershing Square builds on the significant momentum we have created to return GGP to a strong financial foundation for the future," said Adam Metz, GGP's CEO. "Our goal is to raise capital in the most cost-efficient way to maximize value for all of our stakeholders."

Simon officials, who have also criticized Brookfield's plan as being too lethargic in comparison to its $10-billion takeover plan, could not be reached for comment Monday night. The Indianapolis firm has started due diligence with GGP, though there have been rumors that Australian-based Westfield Group and New York City-based Vornado Realty Trust may also make a takeover offer to GGP. The bankruptcy court has agreed to a timeline that will have GGP creditors vote on a takeover plan in September.