May 11, 2010
Bankruptcy Court approves General Growth Property’s Selection of Willkie client Brookfield Asset Management Inc. as cornerstone equity investor.
On May 7, the U.S. Bankruptcy Court for the Southern District of New York authorized General Growth Properties, Inc. to enter into three investment agreements, including a cornerstone investment agreement with an affiliate of Willkie client Brookfield Asset Management Inc., one of the world's largest real estate investors and asset managers. Together, the Brookfield-led investments call for Brookfield, Pershing Square Capital Management, L.P. and Fairholme Capital Management, LLC to invest over $6.55 billion in equity capital in GGP, backstop a $1.5 billion debt raise, and backstop a $500 million equity rights offering, the proceeds of which will be used by GGP to fund a standalone recapitalization of its company, provide par plus accrued interest to all unsecured creditors, and provide a substantial recovery to the company's existing equity holders.
Bankruptcy Court approval of the Brookfield-led equity commitment followed five weeks of an active and competitive auction process in which Simon Property Group, the largest mall owner and developer in the United States, attempted to unseat Brookfield's position as cornerstone investor by proposing both to acquire the entirety of GGP, the number two mall owner and developer in the United States, and/or replace Brookfield as a cornerstone equity provider. Simon's efforts included an eleventh hour offer to purchase GGP for $6.5 billion in cash and stock to GGP's existing shareholders on the eve of the Bankruptcy Court hearing. In connection with the approval of GGP's selection of Brookfield as the lead equity commitment provider, the Bankruptcy Court also approved the parties' agreements that the equity commitment providers receive warrants to purchase approximately 103 million common shares in GGP (which will vest in stages throughout the balance of 2010, and have been valued by GGP to initially be worth approximately $315 million and thereafter increasing to approximately $688 million -- as the warrants vest -- by year end). Additionally, upon consummation of a recapitalization embodying the Brookfield-sponsored plan, the equity providers would also receive warrants to purchase 60 million common shares of reorganized GGP and 40 million common shares of its to be spun-off affiliate General Growth Opportunities (GGP estimated that the value of the final warrants could range between $150 million to $1.6 billion).
General Growth retains the ability to seek higher and/or otherwise better offers to the Brookfield-led investment, and expects to determine the transaction for which it will seek to confirm a plan in early June 2010. Whether or not GGP elects to proceed with the Brookfield-led bid, such parties will be entitled to retain the interim warrants that have been awarded by the Bankruptcy Court.
Willkie’s role as counsel to Brookfield has been widely reported in the press, including The Wall Street Journal. GGP currently has ownership interest in, or management responsibility for, over 200 regional shopping malls in 43 states, as well as ownership in planned community developments and commercial office buildings. Brookfield, focused on property, renewable power and infrastructure assets, has over $100 billion of assets under management.
The multidisciplinary Willkie team handling the matter includes Bankruptcy/Restructuring: partners Marc Abrams and Paul Shalhoub, and associates Jessica Etra and Andrew Sorkin; Corporate: partner Gregory Astrachan, and associates Thomas Mark, Michael Brandt, Christopher Freeland, Ann Harrington, Steven Poliner and Amanda Burke; Real Estate: partners Eugene Pinover and Thomas Henry, and associate Steven Rosenzweig; Tax: partner Henry Cohn; Litigation: partners Tariq Mundiya, Mary Eaton and Roger Netzer, and associate Dan Kozusko; Antitrust: partner William Rooney and associate Jeff Korn; Employee Benefits: associate Katie Calabrese; and Environmental: associate Kevin Klesh.
