Ackman goes All in on General Growth Properties

In most bankruptcies, stockholders wait for scraps while creditors chew over a distressed company's fate. Not so for Bill Ackman, who as a shareholder in General Growth Properties (NYSE:GGP) has plumped out for a prime seat at the negotiating table.

From the WSJ -- The activist investor's firm, Pershing Square Capital Management, will provide $375 million in ultrasenior financing for General Growth while it reorganizes through bankruptcy. The so-called debtor-in-possession, or DIP, financing gives Pershing valuable sway to protect its roughly 25% equity stake.

Mr. Ackman is exploiting a cash-scarce environment to juice his bet on the company's operations. With many banks too constrained to provide DIP financing, Pershing Square is empowered to push for ways to reduce the company's $27 billion in debt.

The financing terms give a hint of how much Pershing Square can flex its muscles. The pact carries 7% in combined commitment and exit fees, among the highest for any DIP agreement since the credit crisis began, according to Standard & Poor's.

Pershing Square may be rewarded handsomely. The DIP terms include warrants to buy 4.9% of the company if it emerges healthy from bankruptcy, and General Growth also has the option to repay the entire $375 million to Pershing Square in stock. This time, Mr. Ackman may have truly gone all in.

SOURCE: http://online.wsj.com/article/SB123993171130927813.html