More Business News:
Default for Rouse Company Parent General Growth Imminent
We're sorry, the article you are looking for could not be found. Please contact the site administrator if you think this is an error.
Fitch: Default Imminent for General Growth Properties; IDR Lowered to 'C'
Fitch Ratings-New York-09 December 2008: With General Growth Properties (NYSE: GGP) recently receiving short-term extensions of the maturity dates on both corporate and non-recourse debt obligations, default of some kind appears imminent, according to Fitch Ratings, which has downgraded the Issuer Default Ratings (IDRs) and outstanding debt ratings of General Growth Properties (NYSE: GGP) and its subsidiaries as follows:
General Growth Properties, Inc.
--IDR to 'C' from 'B'.
GGP Limited Partnership
--IDR to 'C' from 'B';
--Revolving credit facility to 'CC/RR5' from ' B-/RR5';
--Term loan to 'CC/RR5' from ' B-/RR5';
--Exchangeable senior notes to 'CC/RR5' from ' B-/RR5';
--Perpetual preferred stock (indicative) to 'C/RR6' from 'CCC/RR6'.
The Rouse Company LP
--IDR to 'C' from 'B';
--Senior unsecured notes to 'CC/RR5' from ' B-/RR5'.
The ratings remain on Rating Watch Negative by Fitch.
Fitch's rating action contemplates that either a distressed debt exchange, whereby GGP would be forced to restructure its debt obligations in an effort to avert bankruptcy, or failure to repay debt currently due is likely in the near term. Fitch considers a distressed debt exchange, which includes a material reduction in terms, to be a default.
Fitch believes that even if the company is able to agree to longer-term extensions for its recourse and non-recourse obligations, such extensions may constitute a distressed debt exchange and therefore a default under Fitch's rating criteria, given that a default of these obligations would trigger a cross-default provision in GGP's credit agreement.
Fitch's rating actions also acknowledge that conditions within both the secured and unsecured commercial real estate debt capital markets remain poor for borrowers, and are placing significant pressure on GGP's ability to sell assets, enter into joint ventures or otherwise raise adequate capital to repay 2009 maturing unsecured debt totaling approximately $600 million.
Consistent with Fitch's Oct. 14 press release, resolution of the Negative Rating Watch will be driven by GGP's ability to refinance the terms of its near-term indebtedness to provide the company with additional liquidity and longer-term financial flexibility. Fitch would consider upgrading GGP if the company repaid or refinanced its near-term unsecured and secured debt maturities while maintaining solid fundamentals for its operating properties.
GGP is a Chicago-based real estate investment trust (REIT) engaged in acquiring, developing, renovating and managing regional malls in major and middle markets throughout the United States. GGP also has investments in commercial office buildings and community development projects purchased in connection with the Rouse acquisition in 2004. As of Sept. 30, 2008, GGP owned interests in over 200 million square feet of properties and had $33.7 billion in total undepreciated book assets.