Mall Owners Seek Debt Extensions
General Growth and Centro Continue Talks With Lenders Under Deadline December 15, 2008
Both Chicago-based General Growth and Centro have been struggling to refinance debt for months because of the credit crisis. Their problems have intensified as the economy has worsened, triggering bankruptcies and store closings by retailers.
By KRIS HUDSON
The fates of two of the largest retail property owners in the U.S. hung in the balance Monday as General Growth Properties Inc. and Centro Properties Group each negotiated with lenders for extensions of payment deadlines on big debts.
General Growth once again found its efforts to win an extension on a $900 million bank loan stymied by Citigroup Inc., according to people familiar with the matter. Though the six other lenders in the loan had agreed to a long-term extension, all must agree for the pact to be completed.
Two weeks prior, Citigroup scuttled General Growth's bid for a long-term extension of the debt by demanding changes to terms on an unrelated $2.6 billion credit line and term loan that General Growth landed in 2006, these people say. Citigroup supplied more than $100 million of that 2006 loan. The sides ultimately agreed on a two-week extension that expired Friday.
In talks over the weekend, Citigroup made additional demands each time General Growth conceded to its earlier demands, these people say. A representative of General Growth declined to comment Sunday on the talks, as did a Citigroup representative. Other lenders in the loan are Deutsche Bank AG, Eurohypo AG, Wachovia Corp., Bank of America Corp., Goldman Sachs Group Inc. and an unidentified smaller lender.
In Australia Monday, Melbourne-based Centro negotiated with roughly two dozen lenders to extend its payment deadline on $6 billion in debt due at the end of the day. Centro, which owns 650 shopping centers in the U.S. and roughly 130 in Australia and New Zealand, has offered to allow at least $1 billion of the debt to eventually convert into equity. In return, Centro has sought an extension of at least a year and lower interest rates.
General Growth, which owns and manages more than 200 U.S. malls, amassed a $27 billion debt load in an acquisition spree in recent years. The $900 million loan General Growth is trying to extend is backed by two luxury malls on the Las Vegas Strip: Fashion Show mall and the Shoppes at the Palazzo.
If the lenders on that loan declare General Growth in default, it would trigger cross defaults of other General Growth debts and force the company to seek bankruptcy-court protection. Though the two-week extension of the loan expired Friday, the lenders didn't declare General Growth in default as negotiations continued through the weekend and Monday.
Centro racked up roughly $16 billion in debt in recent years, mostly to finance acquisitions. Its problems refinancing and paying its debts erupted in December 2007, and it has obtained numerous extensions from its lenders since.
Wall Street Journal
