BANK OF Ireland’s American unit has emerged as a lender to insolvent shopping mall owner General Growth Properties (GGP), which has buckled under the weight of $27.3 billion in debts to file the biggest real estate bankruptcy in US history.
Chicago-based GGP, the second-largest mall business in the US, listed $29.5 billion in assets in a Chapter 11 filing yesterday to the Southern District Court of New York. As credit market disruption continues to extract a drastic toll on heavily indebted companies worldwide, GGP’s bankruptcy represents the culmination of an unsuccessful struggle to refinance its debt.
Bank of Ireland is understood to have lent “tens of millions” of dollars last July to an off balance sheet special purpose vehicle which runs a certain number of GGP’s shopping centres.
The loan was part of a $875 million transaction arranged by Eurohypo, a unit of Commerzbank which is GGP’s largest creditor with claims for a total of $2.59 billion. Some $2.33 billion of that sum is held by a group of more than 170 creditors.
“Bank of Ireland has no exposure to GGP syndicate facilities or unsecured corporate facilities,” said a spokesman. “Our involvement with GGP is directly secured on a number of regional malls in the US that are performing well with strong rental income and low LTVs [loan to value ratios].”
Filings with the Securities Exchange Commission in New York indicate that Bank of Ireland entered the deal via its branch in Connecticut. However, the filings do not quantify its exposure.
GGP was set up in 1954 by brothers Martin and Matthew Bucksbaum, who expanded their family’s grocery firm to build a shopping centre in Iowa. The company expanded by building and buying malls, its largest acquisition being the 2004 purchase of high-end mall owner Rouse Cos for $14.2 billion.
The deal, financed only with debt, added 37 malls to its portfolio. “We intend to emerge as a leaner company,” GGP president Thomas Nolan said. “We want to come out as a less leveraged company.” – Additional reporting: Reuters/Bloomberg
