Getting hard to keep up with it
1- Bruce Berkowitz and Fairholme (FAIRX) are now interested in NOT is getting their unsecured debt paid off BUT getting it converted into equity:
Berkowitz says he isn’t looking for a one-time, short-term gain. Helping General Growth emerge from bankruptcy as healthy as possible without a takeover and with the ultimate conversion of Fariholme’s stake into equity is an appealing option according to Berkowitz.
Berkowitz cites an earlier deal with AmeriCredit Financial (ACF) as the sort of win-win situation that could be an option with General Growth. In late 2008, Fairholme exchanged its senior AmeriCredit debt for new equity in the company, providing much needed liquidity while locking in favorable terms for Fairholme shareholders. AmeriCredit’s stock price has more than quadrupled since the deal.
This hurts Simon’s (SPG) offer as Berkowitz holds >$500m of unsecured debt, making him one of the larger holders. By his admission on wanting a conversion, it would stand to reason he would be voting against the Simon transaction which would simply offer FAIRX a dollar for dollar on claims.
2- Brookfield Asset (BAM) has filed notice they are increasing their shelf offering from $1B to $2B. Odd timing? Coincidence? Readers know my opinion (the same as it has been since last year), the Brookfield Boys (BAM/BPO) are going to make a significant offer for GGP. This is simply priming the pump.
3- The case for limiting shareholder rights. A dim wit sues GGP because the Board rejected Simon’s offer that would have caused him to receive 40% LESS for his shares at today’s prices had they accepted it.
4- David Simon continues his tantrum with another letter to GGP. In this one he quotes the unsecured creditors committee as supporting the offer as it pays them in full.
Note… they HAVE TO accepted it if it pays them in full because under the law that is all they are entitled to. They cannot negotiate a better deal that 100% full payment. ANY offer that provides that must be accepted. What David Simon either does not know or does and refuses to accept is that management’s legal obligation is to maximize value for ALL stakeholders and that does include equity holders. Accepting an offer today below the current fair market value of the stock would be a breach of that duty to equity holders.
It also tells us that GGP management is working deal that values the equity higher than the $9 a share SPG offered. This will give them concrete proof to the Judge SPG’s offer is inadequate and allow him to extend the exclusivity period. See #1 above for more on that. Berkowitz is not an agitator by any means. He has a history of working with, not against management of companies he takes stakes in. His statement now, as a large unsecured creditor IMO means he wants equity and want to torpedo SPG’s bid and any chance to end the exclusivity period. Ending it means a “free for all” and hurts his position at the bargaining table.
His comment that he wants equity can also be used by GGP to show the Judge the fallacy of SPG’s reasoning that the offer is “fair to all stakeholders” as having a large unsecured stakeholder wanting to convert that stake into equity implies more strength and thus value in it.