Friday, September 19, 2008

Concede this, baby -- GGP and recourse

General Growth Properties is wrapping up a $1.75 billion loan with Eurohypo, Wachovia and ING, and the Journal has just reported that GGP has agreed to increase the recourse from 25% to 50%. (For you laypeople, that means if the deals sours, the creditors can go after GGP to repay the debt directly.)

Usually you try to limit your recourse on commercial loans. But lenders are pushing for recourse again, and the fact they wanted more here makes sense. And knowing you have a backstop does make the loan more attractive. GGP has a lot of debt coming due, and they are negotiating deals to refinance.

GGP's a good company with solid properties. So I am not surprised to see this in print:

But Bernie Freibaum, General Growth's chief financial officer, said in an interview late Thursday that the greater recourse was granted to attract additional lenders, not to mollify those already committed. "It doesn't cost us any money," Mr. Freibaum said of the recourse change. "It doesn't change the interest rate. And if it helps us complete the deal, then it was a good business decision."
Of course, you still have Macklowe sized debts, but the difference is that you have time -- a couple of years -- to figure out options. Share prices are way down, but I agree with the Fitch analyst cited in the story who said GGP's goals are achievable.

1 comments:

Anonymous said...

CFO out, Dividend gone...I wonder what else is hidden in the closet.

Still achievable?

 
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