CHICAGO — General Growth Properties (GGP) is one step closer to emerging from Chapter 11 bankruptcy, which it entered into last summer. The Teacher Retirement System (TRS) of Texas has agreed to invest $500 million in equity in GGP, which will help the troubled company fulfill its debt obligations.

At the same time, GGP has filed its proposed plan for reorganization with the U.S. Bankruptcy Court for the Southern District of New York. The company plans to emerge from bankruptcy in October. At this time, it will split into two publicly traded companies, New GGP and Spinco. In exchange for its investment, TRS of Texas will receive equity in New GGP at $10.25 per share. It will not hold a stake in Spinco.

The equity investment is one of several conditions of GGP's emergence from bankruptcy. Since last December, the company has restructured approximately $15 billion in project-level debt. Under its reorganization plan, GGP will satisfy its debt claims in full and recapitalize with $8.55 billion in new capital. This funding is being provided by Brookfield Asset Management, Fairholme Funds and Pershing Square Capital Management. It is broken down as follows:

• $6.3 billion of new equity at $10 per share of New GGP.
• A $250 million backstop equity commitment for a rights offering by Spinco at $5 per share.
• A $1.5 billion backstop debt commitment for a New GGP credit facility by the three companies.
• A $500 million backstop equity commitment by Brookfield Asset Management and Pershing Square Capital Management for a rights offering by New GGP at $10 per share.

The reorganization plan provides GGP the option to replace this capital with that from other sources, including the public capital markets. GGP plans to file a S-11 registration statement with the Securities and Exchange Commission detailing its plans to raise equity capital prior to or shortly after its emergence from bankruptcy.

New GGP and Spinco will be run by separate boards and management teams. New GGP will retain control of approximately 180 of the company's properties. It will focus on stable, income-producing malls and other assets. Spinco will retain very little debt and will focus on near-, medium- and long-term development opportunities.

— Coleman Wood

Content Partners
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