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Mayfair Mall owner may headed for bankruptcy
Published November 11, 2008 - BizTimes Daily
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General Growth Properties Inc., the owner of Mayfair Mall in Wauwatosa, is warning that it may be forced to file for bankruptcy if it cannot refinance its growing pile of debt.
"In the event that we are unable to extend or refinance our debt or obtain additional capital on a timely basis and on acceptable terms, we will be required to take further steps to acquire the funds necessary to satisfy our short-term cash needs, including seeking legal protection from our creditors," the Chicago-based real estate investment trust said in a filing with the U.S. Securities & Exchange Commission late Monday. "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 company's stock plunged 70 percent to just 40 cents per share this morning.
General Growth attributed its problems to the soft U.S. economy, declines in property values and a "significant decrease in the fair value" of the company's outstanding equity and debt securities as of the end of the third quarter.
"We have a substantial amount of debt which we may not be able to refinance or repay. As of Sept. 30, 2008, we have approximately $1.13 billion and $3.07 billion in debt maturing in 2008 and 2009, respectively. Due to the continued weakness in the credit markets, there can be no assurance that we will be able to refinance this debt on acceptable terms or otherwise. Our ability to successfully refinance our debt is also negatively effected by recent downgrades of our debt by national credit ratings agencies as well as the real or perceived decline in the value of our properties based on deteriorating general and retail economic conditions," the company reported.
"General and retail economic conditions continue to weaken, and we expect this weakness to continue and worsen in 2009 as the economy enters a recessionary or near recessionary period. Consumer spending recently declined for the first time in 17 years, the unemployment rate is expected to rise, consumer confidence has decreased dramatically and the stock market remains extremely volatile. Given these expected economic conditions, we believe there is a significantly increased risk that the sales of stores operating in our centers will decrease, negatively affecting their ability to make minimum rent payments and increasing the risk of tenant bankruptcies," the company stated. "In addition to the direct adverse effect of tenant failures to pay minimum rents and tenant bankruptcies on our operations, these events also negatively affect our ability to attract and maintain minimum rent levels for new tenants. These circumstances negatively affect our revenues and available cash, and also reduce the value of our properties, reducing the likelihood that we would be able to sell such properties, on attractive terms or at all."
General Growth's troubles also have prompted at least four federal class-action lawsuit claims to be filed against the company this week. One of the claims, filed by Johnson & Associates in U.S. District Court for the Northern District of Illinois, accuses the company of making "false and misleading statements about General Growth's access to financing. Specifically, defendants represented that General Growth had the ability to refinance billions of dollars in debt that was coming due in the fall of 2008 and spring of 2009 on acceptable terms. In fact, General Growth did not have access to such financing. Further, defendants failed to disclose that the company's president/chief operating officer and its chief financial officer had received loans from the chief executive officer's family trust in violation of the company's own code of business conduct and ethics."
