IBJNews

Creditors: General Growth biased toward Brookfield proposal

Back to TopCommentsE-mailPrintBookmark and Share

Chicago-based General Growth Properties Inc. may be prejudiced in favor of a risky bid from Brookfield Asset Management Inc. because of that company’s agreement with William Ackman’s Pershing Square Capital Management LP, creditors said in court documents.

The bankrupt owner of more than 200 U.S. malls from Boston to Los Angeles, which also had an unsolicited $10 billion offer from Indianapolis-based Simon Property Group Inc., shouldn’t be allowed to control its bankruptcy for six more months, unsecured creditors said in papers filed Tuesday in U.S. Bankruptcy Court in Manhattan.

Creditors added reasons to their prior objection, citing a Feb. 24 agreement between Pershing and Brookfield and a “risky” buyout plan. Simon also filed a new objection Tuesday, citing that deal. Under General Growth’s plan, Brookfield would be the so-called stalking horse bidder to compete with other potential buyers.

The agreement puts General Growth, whose board members include Ackman, “into an obvious conflict of interest situation where the debtors must choose between the best interests of the estate and the economic interests of one of their most active and vocal directors,” lawyers for unsecured creditors wrote.

“Ackman, therefore, now has a unique and personal interest in making sure that Brookfield is approved as General Growth’s stalking horse,” lawyers for Simon wrote.

General Growth, in support of its bid to keep control over its bankruptcy, has said it’s pursuing a “dual track” process that will consider both mergers and financial bids. It said in court filings Monday that it will seek competing bids to Brookfield’s and that it aims to confirm a reorganization plan by Oct. 5.

U.S. Bankruptcy Judge Allan Gropper, at a hearing Wednesday, is scheduled to consider General Growth’s request for an extension of its exclusive right to file a reorganization plan.

Ackman is a founder and principal of Pershing, which owns 25 percent of General Growth’s stock, according to creditors. Under the “interim bid protections” agreement, Pershing will pay 25 percent of its profits above $12.75 a share to Brookfield if other protections for Brookfield aren’t approved by the bankruptcy court and if the company reorganizes with an investor other than Brookfield, creditors said.

The accord also gives Toronto-based Brookfield warrants to buy 60 million General Growth shares at a strike price of $15 each over seven years, after the earlier agreement expires, creditors said.

General Growth said it plans to seek approval April 13 of a formal bid-protection agreement to aid Brookfield as a stalking-horse bidder. Such agreements, designed to compensate a company for time and money spent evaluating a potential acquisition, are standard in bankruptcy auctions.

General Growth said in a Feb. 24 statement that it would offer the warrants and interim protection as compensation for Brookfield’s financial commitment to its offer.

Creditors said the Brookfield proposal is risky for them because it depends on more than $5.8 billion in debt and equity raises and asset sales in addition to Brookfield’s investment. The proposal might convert their debt to stock in a new company that is at “an artificially high valuation” creditors said.

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
 
Subscribe to IBJ
  1. The deductible is entirely paid by the POWER account. No one ever has to contribute more than $25/month into the POWER account and it is often less. The only cost not paid out of the POWER account is the ER copay ($8-25) for non-emergent use of the ER. And under HIP 2.0, if a member calls the toll-free, 24 hour nurse line, and the nurse tells them to go to the ER, the copay is waived. It's also waived if the member is admitted to the hospital. Honestly, although it is certainly not "free" - I think Indiana has created a decent plan for the currently uninsured. Also consider that if a member obtains preventive care, she can lower her monthly contribution for the next year. Non-profits may pay up to 75% of the contribution on behalf of the member, and the member's employer may pay up to 50% of the contribution.

  2. I wonder if the governor could multi-task and talk to CMS about helping Indiana get our state based exchange going so Hoosiers don't lose subsidy if the court decision holds. One option I've seen is for states to contract with healthcare.gov. Or maybe Indiana isn't really interested in healthcare insurance coverage for Hoosiers.

  3. So, how much did either of YOU contribute? HGH Thank you Mr. Ozdemir for your investments in this city and your contribution to the arts.

  4. So heres brilliant planning for you...build a $30 M sports complex with tax dollars, yet send all the hotel tax revenue to Carmel and Fishers. Westfield will unlikely never see a payback but the hotel "centers" of Carmel and Fishers will get rich. Lousy strategy Andy Cook!

  5. AlanB, this is how it works...A corporate welfare queen makes a tiny contribution to the arts and gets tons of positive media from outlets like the IBJ. In turn, they are more easily to get their 10s of millions of dollars of corporate welfare (ironically from the same people who are against welfare for humans).

ADVERTISEMENT