Judge could tip General Growth future

NEW YORK (Reuters) - The top two U.S. mall owners will square off before a judge on Wednesday to shape the outcome of the largest U.S. real estate bankruptcy ever.

General Growth will ask Judge Allan Gropper of the federal bankruptcy court in Manhattan to give it six more months in which it is the only one who can present a plan to emerge from bankruptcy. It plans to file the plan by the end of June and have it confirmed by October 5, according to court filings.

On the other side is Simon Property Group , which wants to buy General Growth, and the official committee of unsecured creditors.

"They don't want the debtor to have a stranglehold on the process for six months," Barry Adler, New York University law professor, said.

Separately, General Growth said on Tuesday it plans to list its common shares on the New York Stock Exchange and expects it to begin trading on March 5 under the symbol "GGP".

While the judge may not rule immediately after the hearing, what he does next could be critical.

He could deny the request -- essentially starting the clock on an auction for General Growth.

Or he could decide to give the company a shorter extension, which could pressure General Growth to cut a deal.

Or the judge could give General Growth what it wants.

"Equity and management (of General Growth) want the ability to tell any bidder that comes along that if you want the assets right now, if you don't want to wait six months when things may change and go bad for them, then what you're going to have to give is a taste, a payoff," Adler said.

Each side argues its approach will lead to more and better offers for the company.

In court filings, General Growth said its plan, devised with Brookfield Asset Management Inc's capital infusion, is simply a "stalking horse" -- a bottom offer that will serve for others to beat if they want to buy the company.

General Growth, meanwhile, has agreed to open its books to Australia-based Westfield Group and several institutional investors, according to a source close to the company. Under General Growth's plan, interested investors would have 60 days to submit an offer.

Westfield, the world's biggest mall owner, is probably not interested in the whole company, real estate experts say, but may want to partner up to acquire certain assets. Westfield has declined to comment on General Growth.

China Investment Corp , the $300-billion sovereign wealth fund, is also looking at General Growth, said a source briefed on the situation. However, the source added that CIC is also considering a fair number of other possible U.S. property investments.

The Simon side, however, contends that the there is no need for additional time since General Growth already has an offer.

Simon, the largest U.S. mall owner, has offered $10 billion for General Growth, paying off unsecured creditors in cash and giving equity holders about $6 a share. The official committee of unsecured creditors supports the Simon proposal.

Simon also includes a spinoff of the more residential Master-Planned Communities by shareholders at about $3 per share. Investors could opt for Simon shares instead of cash.

Simon's plan also calls for the company to be split into two, but the lesser unit would contain only the master-planned community business.

Days later, Chicago-based General Growth said it had teamed up with Brookfield to infuse capital into the Chicago-based mall owner and emerge from bankruptcy as a stand-alone company. That plan values General Growth at $15 per share and would repay holders in full with interest.

The plan calls for General Growth to be split into two companies. The first would hold the bulk of the company's value -- its high-performing malls. The second, called General Growth Opportunities, would give shareholders the less attractive assets --its residential land development business, 13 "underwater" malls and about 24 non-income-producing malls.

But the offer counts on a number of things falling into place: a public offering must raise $2.8 billion from stock sales and $1.5 billion in new debt, and the company must raise $1 billion in cash to help pay off creditors in cash.

However, because many of General Growth's properties have huge mortgages, that would mean selling about $4 billion of assets to clear the $1 billion in cash, according to Green Street Advisors.

Because of those conditions, some analysts say that Simon will ultimately clinch a deal once it sweetens its offer.

"A topping bid by Simon is still the most likely outcome, and we continue to believe that a bid in the $12 to $15 per share range would represent a fair outcome for General Growth shareholders and a fully justifiable price for Simon," Cedrik Lachanc, senior analyst at Green Street Advisers said.

(Reporting by Ilaina Jonas; additional reporting by Paritosh Bansal; Editing by Gary Hill and Derek Caney)

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