Ackman Raises the Stakes on His General Growth Bet 6 minutes ago Ackman Raises the Stakes on His General Growth Bet
As Mall Operator Nears a Debt Deadline, Investor Wagers Against Bankruptcy Filing
With just two days until General Growth Properties Inc. faces a major debt deadline, activist investor William Ackman is doubling down on his gutsy bet that the ailing mall giant will be able to avoid bankruptcy.
Last month, Mr. Ackman reported that he had acquired a 7.5% stake in General Growth, which has been struggling all year to reduce its crushing $27 billion debt load. That was as much as an outsider could buy under the rules of the real-estate investment trust, But that didn't stop Mr. Ackman, whose Pershing Square Capital Management LP is still healthy enough to still be making investments.
Pershing, which has over $5 billion under management, has entered into swap contracts with BNP Paribas, Citigroup Inc. and others institutions that have bought shares on its behalf covering another 18.1% of General Growth.
In addition, Pershing reported earlier this week that it also owns an undisclosed amount of the company's debt, which might give it a seat at the bankruptcy table as well as leverage to persuade the company to raise its 7.5% ownership cap.
Mr. Ackman hasn't divulged his strategy, but it is already clear he doesn't want to sit on the sidelines. He was at General Growth's Chicago headquarters on Dec. 3 to meet with interim Chief Executive Adam Metz and interim President Thomas Nolan, according to people familiar with the matter. In what these people describe as an "introductory" meeting, Mr. Ackman told Messrs. Metz and Nolan that he sees value in General Growth's shares and he is supportive of the management team, these people say.
Pershing's General Growth investment is an unusual one for Mr. Ackman, who typically acquires huge stakes in retailers like Sears Canada Inc., Target Corp. or Wendy's International Inc. and then presses management to spin off divisions, sell real estate or make other strategic changes.
In this case, Mr. Ackman, like other equity owners, is at the mercy of creditors who could push the company into bankruptcy, wiping out much or even all of its investment. The ax may fall as early as Friday, when General Growth has to restructure or extend payment on a $900 million bank loan coming due.
