General Growth Pays Down $391M in Short-Term Debt

As part of its ongoing effort to deal with some $18.4 billion in debt that’s scheduled to come due over the next three-and-a-half years, Chicago-based General Growth Properties has completed the repayment of $391 million in near-term mortgage loans. The company has also closed another part of the $1.75 billion finance package (a secured loan facility) that it has been putting together recently as part of its plan to deal with its debt. Yesterday’s closing brings the total loan facility amount currently outstanding to $1.41 billion. A final seven properties were added to the collateral pool, thus completing the 24-property collection of assets, according to General Growth. The retail giant plans to add additional lenders to the loan facility until the total amount funded reaches $1.75 billion. The German bank Eurohypo is the lead lender in that deal. It has been a bumpy year for General Growth. The market’s confidence in the company–though its 200 regional mall assets are worth considerably more than its debt–has evaporated in the wake of the credit crunch and the retail slump. The company’s stock has dropped about 47 percent in value since September 2007. In August, president & COO Robert Michaels sold 700,000 shares, or about half of his holdings, because of a margin call, and the company also announced the delay of a major mall project in Las Vegas, as reported by CPN.On the other hand, the company reported 93.2 percent occupancies in the second quarter of this year, compared with 92.9 percent for the same period in 2007. The company’s funds from operation (FFO), an important measure of REIT health, dropped only slightly in the second quarter of this year, to 72 cents per share, down a penny from 2Q07. General Growth did not return calls from CPN today to comment on its recent activities, but Bernard Freibaum, the company’s executive vice president & CFO, had this to say about mall owner’s overall strategy during General Growth’s conference call about a month ago: “Rather than seek a massive near-term capital transaction, the right plan is to gradually and not too immediately reduce our leverage,” he noted. “No large-scale distressed asset sales or large chunks of extremely expensive capital are necessary.”