General Growth solicits forbearance for Rouse unsecured notes, aims to negotiate restructuring

New York, March 9 - General Growth Properties, Inc. said it has begun a consent solicitation requesting forbearance from holders of its notes issued by its Rouse Co. LP subsidiary.

The Chicago-based real estate investment trust is requesting forbearance from remedies for payment and other defaults through Dec. 31, 2009.

Covered by the solicitation are five series of notes with $2.25 billion principal amount outstanding.

"This is a significant step in our ongoing efforts to reach a plan with our lenders to develop a long-term solution to the company's maturing debt" said Adam Metz, chief executive officer, in a news release.

"We developed this forbearance working together with the financial and legal advisors to an ad hoc committee of holders of TRCLP [Rouse Co.] notes the members of which hold" 41% of the securities.

Specifically, General Growth is asking holders of Rouse's 3.625% notes due March 15, 2009 and 8% notes due April 30, 2009 to forbear from exercising remedies due to Rouse's failure to repay the debt at maturity.

Holders of these two series of notes and also Rouse's 7.20% notes due 2012, 5.375% notes due 2013 and 6.75% notes due 2013 are being asked to forbear from exercising remedies due to Rouse's failure to pay cash interest during the forbearance period. Interest will continue to accrue and will be added to the principal amount of the notes.

General Growth is also asking holders to forbear from exercising remedies for some other potential defulats and cross-defaults.

In return for consents, General Growth will pay a quarterly consent fee of $0.625 in cash per $1,000 principal amount.

Rouse will also agree to various restrictions, including limitations on certain fundamental changes, incurrence of debt and liens, asset sales and issuances of capital stock by subsidiaries, dividends and other restricted payments and investments, transactions with affiliates, as well as limitations on certain kinds of capital expenditures.

Rouse will also provide the ad hoc committee with information, including cash flow budgets, business plans and terms sheets for a comprehensive restructuring plan that will include out-of-court and in-court alternatives. Rouse will also undertake to work with the ad hoc committee's advisors to commence implementation of such a restructuring plan.

The company hopes that the forbearance will become effective on March 16.

Termination events will include bankruptcy events relating to Rouse, breaches by Rouse of its obligations under the forbearance agreement, some cross-defaults on other debt of Rouse and General Growth, and failure to reach agreement on a restructuring plan by the end of July.

For the forbearance to be effective, General Growth needs consents from holders of 90% of the 3.625% notes due March 15, 2009 and the 8% notes due April 30, 2009, and 75% of the 7.20% notes due 2012, the 5.375% notes due 2013 and the 6.75% notes due 2013.

Holders who do not consent will not be bound by the forbearance.

General Growth said it does not plan to make any payments of principal or interest on the Rouse notes during the forbearance period.

General Growth also announced that it is working with the lenders on its 2006 credit agreement, which includes a $590 million revolver and a $1.99 billion term loan, to extend the forbearance agreement currently in place through Dec. 31, 2009. Obtaining this forbearance is a condition to the agreement for the notes.

In addition, General Growth expects to start talks with holders of its $1.55 billion of 3.98% exchangeable senior notes and GGP Capital Trust I's $200 million of trust preferred securities on similar forbearances.

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