Brookfield Asset Management Inc. ("Brookfield") (TSX: BAM.A)(NYSE:
BAM)(EURONEXT: BAMA) today announced that it has signed a
definitive agreement ("Agreement") with General Growth Properties,
Inc. ("General Growth") for a proposed recapitalization of General
Growth. Brookfield, along with its consortium partners, has agreed
to invest $2.625 billion in equity to fund General Growth's
recapitalization as the cornerstone investor for its plan of
reorganization.
Investment Highlights
The plan will result in new General Growth ("GGP") emerging from
bankruptcy on a standalone basis with one of the largest premier
quality portfolios of retail shopping malls in the U.S. GGP will
own the highest quality assets of General Growth, with strong cash
flows, a restructured balance sheet, and predominantly long-term
non-recourse debt. On emergence, existing shareholders will own
approximately 34% of GGP, which will:
-- be one of the largest, high quality publicly traded real estate entities
in the U.S.;
-- have one of the largest equity market capitalizations in the REIT
industry and indices;
-- be the second-largest retail shopping mall company in the U.S.;
-- have a prudently capitalized balance sheet, with no corporate debt, with
the exception of a $1.5 billion newly structured corporate facility; and
-- have newly extended maturities on virtually all of its property
financings.
The stand-alone recapitalization plan agreed to with General
Growth provides an exceptional investment opportunity for existing
shareholders as compared to selling the company today:
-- Given that General Growth has been in bankruptcy and has not had time to
focus on operational enhancement, its cash flows are lower than
comparable portfolios and its shares trade in the stock market at a
valuation substantially lower than its peers. As a result, the sale of
General Growth at this time does not maximize value for existing
shareholders.
-- In the stand-alone plan, GGP's share price should benefit from both
multiple expansion in the short term and increased net operating income
and cash flows over the longer term, as the business is refocused on
operational improvements.
-- Furthermore, under the stand-alone plan, shareholders will own
approximately 34% of GGP, but will also have the possibility that this
percentage will be adjusted upward if $1.9 billion of additional capital
is raised at higher share prices (with a corresponding reduction of the
capital provided by Fairholme Capital and Pershing Square).
-- Alternatively, in a sale of the company, shareholders would receive
either cash or securities of a competitor. For shareholders who desire
cash, there is now a highly liquid market on the NYSE for sale of their
shares which can readily satisfy this requirement. For shareholders who
wish to own competitors' securities, these shares are highly liquid and
existing shareholders may own these by purchasing them in the stock
market instead of trading their undervalued General Growth shares for
these shares in a sale of the company.
Bruce Flatt, CEO of Brookfield said, "We believe this is one of
the great real estate value opportunities currently available in
the capital market. GGP's high quality assets and substantial scale
as the second-largest regional mall owner presents all shareholders
with a compelling long-term investment opportunity."
The Plan
The Brookfield funding is the cornerstone investment in the $8
billion being raised by General Growth that will enable it to repay
all creditors at par plus accrued interest. In addition to
Brookfield's funding, General Growth has entered into definitive
agreements for equity commitments from Fairholme Capital and
Pershing Square of $2.8 billion and $1.1 billion respectively, and
with Brookfield's assistance, is finalizing the terms of a new $1.5
billion corporate credit facility. Following the recapitalization,
Brookfield expects to own approximately 26% of GGP's equity, and
will hold three of nine board seats in the recapitalized GGP.
This plan, including the Agreement with Brookfield, is subject
to approval of the U.S. Bankruptcy Court ("Court") following Court
approval of disclosure materials that will be distributed to
General Growth stakeholders. Certain elements of the transaction
will be put before the Court before the end of April. Under the
terms of the Agreement:
-- General Growth's unsecured creditors will receive a full recovery of par
value plus accrued interest.
-- General Growth's existing shareholders will receive:
-- one share of GGP common stock for each existing share held,
representing in aggregate approximately 34% of the recapitalized
company; and
-- one share of General Growth Opportunities ("GGO"), a new company
that will be spun out to shareholders and own certain assets, such
as master-planned communities and landmark developments, for each
existing share held, representing in aggregate approximately 86% of
GGO, following the GGO rights offering described below .
-- Brookfield and its consortium partners will invest $2.5 billion for 26%
of the GGP common stock; and Fairholme Capital and Pershing Capital will
invest $2.8 billion and $1.1 billion respectively, for 28% and 11%,
respectively of GGP's common stock, subject to reduction to $1.9 billion
in the event GGP is able to raise replacement equity capital on more
favourable terms.
-- GGO will raise $250 million through a rights offering, at a price of
$5.00 per share, with Brookfield backstopping $125 million of the
offering, resulting in a 7% interest in GGO if the backstop is fully
drawn. Fairholme Capital and Pershing Square will backstop the other 50%
of the rights offering. Brookfield, Fairholme Capital and Pershing
Square will each receive warrants in return for each of their investment
commitments.
Brookfield has also agreed to provide the following to GGP after
emergence from bankruptcy:
-- provide office asset management services at no cost to the company;
-- provide master-planned community asset management assistance, including
installing a Brookfield executive as CEO of GGO, if requested by GGP;
-- assist in completing the $1.5 billion corporate credit facility for GGP;
-- substantially lock-up its share investment for a minimum period of 18
months; and
-- assist GGP generally in corporate finance matters, including providing
access to its global banking and capital relationships.
The complete Agreement with Brookfield is available in the
restructuring section of General Growth's website at
www.ggp.com.
Brookfield Asset Management Inc., focused on property, renewable
power and infrastructure assets, has over $100 billion of assets
under management and is co-listed on the New York and Toronto Stock
Exchanges under the symbol BAM and on NYSE Euronext under the
symbol BAMA. For more information, please visit our website at
www.brookfield.com.
Note: This news release contains forward-looking information
within the meaning of Canadian provincial securities laws and
"forward-looking statements" within the meaning of Section 27A of
the U.S. Securities Act of 1933, as amended, Section 21E of the
U.S. Securities Exchange Act of 1934, as amended, "safe harbour"
provisions of the United States Private Securities Litigation
Reform Act of 1995 and in any applicable Canadian securities
regulations. The words "enable," "proposed," "expects," "provide,"
"emerging," "believe," "opportunity," "possibility" derivations
thereof and other expressions, including conditional verbs such as
"will," "should", "may" are predictions of or indicate future
events, trends or prospects or identify forward-looking statements.
Forward-looking statements in this news release include statements
in regards to the proposed recapitalization of General Growth
Properties Inc. ("GGP"),the status of GGP after emerging from
bankruptcy, our beliefs about the GGP investment opportunity, the
terms of Brookfield's agreement with GGP in connection therewith,
and our views with respect to adding value for all shareholders
involved in the recapitalization of GGP. The reader should not
place undue reliance on forward-looking statements and information
as such statements and information involve known and unknown risks,
uncertainties and other factors which may cause the actual results,
performance or achievements of the company to differ materially
from anticipated future results, performance or achievement
expressed or implied by such forward-looking statements and
information.
Factors that could cause actual results to differ materially
from those contemplated or implied by forward-looking statements
include: economic and financial conditions in the countries in
which we do business; the behaviour of financial markets, including
fluctuations in interest and exchange rates; availability of equity
and debt financing; strategic actions including dispositions; the
ability to complete and effectively integrate acquisitions into
existing operations and the ability to attain expected benefits;
the company's continued ability to attract institutional partners
to its Specialty Funds; adverse hydrology conditions; regulatory
and political factors within the countries in which the company
operates; acts of God, such as earthquakes and hurricanes; the
possible impact of international conflicts and other developments
including terrorist acts; changes in accounting policies to be
adopted under IFRS and other risks and factors detailed from time
to time in the company's form 40-F filed with the Securities and
Exchange Commission as well as other documents filed by the company
with the securities regulators in Canada and the United States,
including the company's most recent Management's Discussion and
Analysis of Financial Results under the heading "Business
Environment and Risks."
We caution that the foregoing factors that may affect future
results is not exhaustive. When relying on our forward-looking
statements to make decisions with respect to Brookfield Asset
Management, investors and others should carefully consider the
foregoing factors and other uncertainties and potential events.
Except as required by law, the company undertakes no obligation to
publicly update or revise any forward-looking statements or
information, whether written or oral, as a result of new
information, future events or otherwise.
For more information, please visit our web site at
www.brookfield.com.
Contacts: Investors Brookfield Asset Management Inc. Katherine
Vyse, SVP, Investor Relations and Communication (416) 369-8246
(416) 363-2856 (FAX) kvyse@brookfield.com Media Brookfield Asset
Management Inc. Denis Couture, SVP, Corporate and International
Affairs (416) 956-5189 (416) 363-2856 (FAX) dcouture@brookfield.com
www.brookfield.com
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