Mall giant General Growth reworks debt with lenders

LOS ANGELES — Mall operator General Growth Properties, which filed the largest U.S. real-estate bankruptcy case in history earlier this year, said Thursday its lenders have agreed to restructure some $8.9 billion in shopping-mall mortgage loans.

The agreements, which cover loans on more than 70 malls, could enable some of the shopping centers to exit bankruptcy before the end of December, the company said.

Thomas Nolan Jr., General Growth's president and chief operating officer, said he hoped the deals would lay the groundwork for restructuring $6 billion more in mortgage loans on other shopping malls.

General Growth is "hopeful that our other secured mortgage lenders will work with us to reach agreements quickly," he said in a statement.

The Chicago company is the second-largest U.S. mall operator and owns or manages more than 200 malls.

The real estate investment trust and roughly 166 regional shopping centers and subsidiaries filed for Chapter 11 bankruptcy protection in April.

General Growth owns Westlake Center in downtown Seattle and Alderwood mall in Lynnwood, but neither mall was part of the original bankruptcy filing.

Spokesman David Keating said, "We continue to maintain that our bankruptcy process would have no impact on any of our properties."

The company reported $27 billion in debt at the time of the filing.

It racked up the heavy debt load in an aggressive expansion during the height of the real-estate boom and was unable to service it when credit markets dried up last year.

Some lenders complained General Growth had unfairly dragged healthier subsidiaries into bankruptcy with it.

The lenders agreed to extend the due dates on the loans to between January 2014 and as far off as 2018. In return, they will recoup what they originally were owed, plus interest and other bankruptcy-related costs.

In addition, General Growth will be held to stricter oversight on its loans, including a requirement that it strengthen its reserves in certain conditions.

Because the restructuring plan calls for General Growth to pay off the loans in full, the company will retain the equity in the shopping centers, including the Ala Moana Center in Honolulu and the Harborplace & The Gallery in Baltimore.

"They're making the lenders whole for the cost of the bankruptcies and they're going to significantly pay down the loans over time so that the lenders are more likely to recover the amounts they're owed," said Greg Cross, an attorney who represents the largest block of secured General Growth creditors.

The agreements must be approved by the bankruptcy court.