General Growth expected to back Brookfield offer

NEW YORK (Reuters) - General Growth Properties Inc is expected to ask a bankruptcy court on Friday to approve an investment led by Brookfield Asset Management Inc , after reducing a warrants package by 14 percent, a source familiar with the situation said.

The move would be a setback for Simon Property Group Inc , which raised its bid for General Growth, hoping its "best and final" offer would persuade the target to favor its deal.

General Growth believes that court approval of the Brookfield-led bid would protect its downside and give it greater flexibility in negotiating with Simon Property Group Inc , which has bid $6.5 billion to buy all of the company, the source said.

General Growth, however, understands that the warrants, which are worth several hundred million dollars, are a liability for another suitor and would be willing to negotiate with Simon on a price that adjusts for them, the source said.

The investment gives General Growth room to negotiate around antitrust issues with Simon that could arise from a merger of the two largest U.S. mall owners, the source said.

William Ackman's Pershing Square Capital Management, which has committed to invest in General Growth alongside Brookfield, agreed to forgo its interim warrants, reducing the overall package by 14 percent, the source said.

Fairholme Capital Management, the other investor in the group, and Brookfield will still have their warrants, the source said.

The source declined to be named because the talks are not public.

(Reporting by Paritosh Bansal; Editing by Derek Caney)