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>Owner of Paramus Park and Willowbrook Malls May Declare Bankruptcy

>Mall owner’s default risk high

Wednesday, December 10, 2008
THE RECORD

NEW YORK — Fitch Ratings downgraded Tuesday the credit ratings of General Growth Properties Inc., which owns shopping centers in Paramus and Wayne, saying default may be imminent for the mall owner.

Fitch noted that General Growth’s recent move to extend the amount of time it has to repay debt and said it thinks the company may need to restructure its debt to avoid bankruptcy. Fitch considers a distressed debt swap, in which a company exchanges its debt for new bonds at a heavily discounted rate, to essentially be a default.

Fitch also said conditions in real estate debt capital markets are hurting General Growth’s ability to raise money to repay about $600 million in 2009 maturing unsecured debt. General Growth, which has 200 malls nationwide, owns the Paramus Park and Willowbrook malls. It is not expected that bankruptcy would affect the malls’ operations or relationships with tenants.

As one of the nation’s largest shopping mall owners, General Growth has been hit hard by the deteriorating U.S. economy and problems at struggling retailers. It also has taken on massive amounts of debt — last month in a regulatory filing, General Growth said nearly $3.1 billion worth of debt will come due next year.

Earlier this month, General Growth reached an interim agreement to extend the time it has to pay back $58 million in notes to Thursday, just days after the Chicago-based real estate investment trust got a two-week reprieve to pay off $900 million in mortgages.

Fitch downgraded the issuer default rating to “C,” its lowest junk rating, from “B” for General Growth Properties Inc., GGP Limited Partnership and unit The Rouse Co. Fitch also downgraded the revolving credit facility, term loan and exchangeable senior notes ratings for GGP Limited Partnership to “CC/RR5” from “B-/RR5.”

General Growth remains on “negative watch,” meaning further downgrades are possible.

Last month, the company reported disappointing third-quarter results and cut its year-end forecast, weeks after the mall owner’s board removed its chief executive, president and chief financial officer. Their ouster came after the company disclosed that former CEO John Bucksbaum’s family trust provided $90 million in personal loans to cover margin debt for the former CFO and president.

New management has warned that crushing debt combined with the declining economy bring the company’s viability into question.

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