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CHICAGO-General Growth Properties Inc.’s recent hire of Sidley Austin, which has headquarters here and in New York City, for bankruptcy consideration may be the logical next step for a firm that has more than $1 billion in loans coming due and a stock price now in the less-than-$1 basement. However, some bankruptcy experts say that while a Chapter 11 filing may be the best tool to deal with its massive leveraging, the action may not save the powerful retail REIT, which has more than 200 malls in the US.

Officials at GGP released a statement this morning that confirmed the company has hired Sidley in an advisory role, and has not filed for bankruptcy. “As we’ve stated all along, we are looking at multiple options to address our current financial situation, among them being continuing to work with our syndicate of lenders on loan extensions,” according to the statement. “The hiring of such a law firm is standard for any company faced with financial challenges and should not be interpreted any other way.” A trust spokesman refused further comment, and a spokeswoman for Sidley said her client could not confirm or deny any information regarding GGP.

The mall REIT has warned it may be forced to declare bankruptcy. “Our potential inability to address our 2008 or 2009 debt maturities in a satisfactory fashion raises substantial doubts as to our ability to continue as a going concern,” the firm said in a recent quarterly report. The company has more than $900 million in debt scheduled to mature in December, and another $3 billion in debt scheduled to mature in 2009. It’s rumored that the lenders will extend the $900 million payment.

Bankruptcy experts are mixed on whether filing would keep the firm solvent. It’s always difficult, and expensive, for a large company to file bankruptcy, says Rod Anderson, a partner in Holland & Knight’s bankruptcy practice in Tampa. “Bankruptcy is particularly expensive when there’s a company with a lot of moving parts, and it doesn’t solve cash flow issues,” Anderson tells GlobeSt.com. Bankruptcy may be the best thing to do when dealing with balance sheet issues, he says. “Bankruptcy can be a powerful tool in the right circumstances, especially if you need a lot of protection. There’s even protection for tenants, who may be struggling themselves,” he says.

Andrew Gold, partner and head of the Bankruptcy Group at New York City-based Herrick, Feinstein LLP, tells GlobeSt.com that he doesn’t think GGP has a choice – it has to file for protection, he says. “They have $900 million coming due, and their stock’s at 40 cents. I don’t know how they’re going to survive without going through bankruptcy and shedding some of their assets, maybe even forcing a restructuring of the debt through the process. A lot of it will just be giving up the keys.”

He says if or when GGP files, it will be the first of many shopping center owners who pull the trigger. “You’ve got many tenants filing for bankruptcy, and there’s even talk on the street that Macy’s in trouble. There’s sales all over the place,” Gold says.

General Growth claims that its properties are doing well, with high 90s occupancy. The firm has reported an 11% drop in FFO for Q3 2008, and its stock was at 41 cents per share at press time, after hitting an all-time low of 34 cents this morning. The company has attempted some rebuilding, with interim CEO Adam Metz replacing John Bucksbaum, who remains chairman, and interim president Thomas Nolan Jr. replacing Robert Michaels, who was moved to COO. However, the company now faces a class-action lawsuit regarding policy actions in regards to internal loans to executives.

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