Monday, August 3, 2009

GGP - people didn't see this coming?

You can't be serious. The way this case is going, and now with a plan delayed for quite some time, we see this:

[GGP] at a hearing said it was considering ways to treat some of its subsidiaries as a single debtor and override their status as separate companies, according to a transcript of the hearing.
Perhaps even more stunning is this howler:
"This was a surprising development that was probably saber-rattling on General Growth's part," said Daniel Rubock, a senior vice-president at Moody's, who attended the hearing.
Saber-rattling, yes? But surprising? Not in my humble opinion, as I think I alluded to some months ago. From a tactical legal standpoint it makes a lot of sense to me, and I know I am not alone in saying that you could see this being at least a thought in the back of someone's head. I readily admit to happily not being an expert in substantive consolidation, but the mere fear of it in the eyes of the lenders -- even if it is an uphill battle for GGP to get it -- might make some kind of global settlement more likely, as the story quite correctly points out.

Speaking of fear, if you've read this far I think you know this goes way beyond GGP. If the company were to go to that nuclear option and then even succeed, then every other distressed borrower will copycat on to that theory and create what could be a complete disaster at the end of the day. It almost goes without saying that this would mean "pop" goes the loan market, such that it is these days anyway.

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