General Growth Properties (GGP) Sinks On Financing Fears
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Shares of General Growth Properties (NYSE: GGP) are under pressure again today on financing concerns. Today the stock is down 31%, which is on top of yesterday 14% drop and Monday's 14% drop.
In a research report this morning, a Wachovia equity analyst noted that the company doubled their loan guarantee to facilitate funding, but said this is a mixed blessing. They said they suspect weak debt service coverage may be the trigger.
Wachovia noted that in order to obtain additional funding under its $1.75B secured portfolio facility and keep available the full capacity of this facility, GGP agreed to increase the repayment guaranty to one-half the outstanding facility--$755MM of the $1.51B outstanding--or $875MM if fully drawn. Previously, GGP's maximum corporate guarantee was capped at $437.5MM, or 25% of the facility if fully drawn. Corporate guarantees, particularly of this magnitude are an exception among public REITs.
The firm said, "We suspect but have not confirmed that the trigger for this amendment may have had to do with inadequate debt service coverage--or the anticipation of weak coverage--which, under the terms of the facility, could have required partial prepayment."
In a research report this morning, a Wachovia equity analyst noted that the company doubled their loan guarantee to facilitate funding, but said this is a mixed blessing. They said they suspect weak debt service coverage may be the trigger.
Wachovia noted that in order to obtain additional funding under its $1.75B secured portfolio facility and keep available the full capacity of this facility, GGP agreed to increase the repayment guaranty to one-half the outstanding facility--$755MM of the $1.51B outstanding--or $875MM if fully drawn. Previously, GGP's maximum corporate guarantee was capped at $437.5MM, or 25% of the facility if fully drawn. Corporate guarantees, particularly of this magnitude are an exception among public REITs.
The firm said, "We suspect but have not confirmed that the trigger for this amendment may have had to do with inadequate debt service coverage--or the anticipation of weak coverage--which, under the terms of the facility, could have required partial prepayment."
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