February 21, 2009 / 2:23 AM / 11 years ago

General Growth says has defaulted on loans

NEW YORK (Reuters) - General Growth Properties Inc GGP.N, a large U.S. mall owner that has warned it could file for protection from its creditors, has defaulted on some of its loans but its lenders have not yet taken any action, the company said on Friday.

General Growth has been pressed since last year to repay $900 million of mortgages on two Las Vegas shopping malls. A forbearance agreement, in which the lenders agreed not to take any action, expired on February 12, the company said in a filing with the Securities and Exchange Commission on Friday.

The expiration of the forbearance agreements on the mortgages on the malls allows the lenders of the company’s $2.6 billion 2006 credit facility and 2008 secured portfolio facility to end their own forbearance agreements.

But as of Friday, General Growth has not received notice of any such termination, which is required by the terms of the agreements.

The company also said it has been unable to enter into or extend forbearance or similar agreements for its other secured mortgage loans that have matured. It said it could not give assurance that it will be able to do so.

“The company continues to work with its lenders with respect to loans under which it is in default or may be in default in the near future,” General Growth said in the filing.

In November, General Growth, which faces $27 billion of debt maturing over the next four years, warned that it may have to file for Chapter 11 bankruptcy protection from its creditors.

Since then, it has hired bankruptcy attorneys and put several malls up for sale to repay its creditors.

But the credit crisis has ground sales of large, expensive properties to a near halt, with banks holding back on giving out loans, especially real estate loans.

The lenders have not pushed General Growth into bankruptcy in order to keep some control over their loans, said Jim Sullivan, managing director at Green Street Advisors, an independent real estate investment trust research firm.

“In bankruptcy, the bankruptcy judge becomes the referee,” he said. “Pre-bankruptcy, the banks and lenders must feel like they retain a greater level of control over their fate,” Sullivan said.

Still, General Growth may not be able to avoid bankruptcy, he said.

“There is a bunch of bad stuff piling up here, and its hard to see how General Growth avoids bankruptcy at this point,” he said.

Shares of General Growth, which traded at almost $67 less than two years ago, closed at 46 cents on Friday on the New York Stock Exchange. The company is scheduled to report fourth-quarter results on Monday.

Also, General Growth said it had been granted an extension of a $95 million mortgage loan on its Oakwood Center in Gretna Louisiana. Lenders agreed to extend the loan maturity date from February 9, 2009 to March 16, 2009.

Reporting by Ilaina Jonas; Editing by Bernard Orr

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