General Growth asks court to let insurer fund $15.5 million payment

By Caroline Salls

Pittsburgh, Feb. 8 - General Growth Properties, Inc. and subsidiary South Street Seaport LP requested court approval of a stipulation under which the General Growth debtors' primary and excess directors and officers liability insurers would fund a $15.5 million securities class action lawsuit payment without risking violation of the automatic stay imposed by the companies' bankruptcy filing.

According to the motion filed Saturday with the U.S. Bankruptcy Court for the Southern District of New York, several individuals who purchased General Growth common stock between April 2008 and October 2008 filed four securities lawsuits against the company and some of its current and former directors and officers, alleging various violations of the Securities Exchange Act of 1934.

The cases were subsequently consolidated, and General Growth was no longer named as a defendant.

As part of the proposed securities lawsuit settlement, in exchange for payment to be made by the debtors' primary and excess directors and officers liability insurance, the plaintiffs have agreed to release all claims against the individual defendants.

In addition, General Growth said the debtors will not be liable for any settlement payment obligations.

The company said the court has previously granted relief from the automatic stay to allow the payment by the insurer, of defense costs and fees that current or former directors and officers were incurring as defendants in connection with the pre-bankruptcy lawsuits.

Now, General Growth said it is seeking court approval for the insurers to fund the settlement without concern that the automatic stay would be violated.

A hearing is scheduled for Feb. 16.

General Growth, a Chicago-based real estate investment trust that owns regional shopping malls, master planned community developments and commercial office buildings, filed for bankruptcy on April 16, 2009. Its Chapter 11 case number is 09-11977.

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