Tweet me!
What
is Happening Here
·
John Bucksbaum knows
that GGP has a leverage problem. He would
like to de-lever, but he needs entities to step up to the plate willing to buy
large amounts of stock.
·
JB finds someone who is
averse to buying outright, but is willing to buy $734M of stock if JB buys a
substantial amount of stock at the same price.
·
JB goes to Citigroup
and borrows $88M to "buy" stock.
o Citigroup
is willing to loan the money b/c it has MB Capital's 67M shares ($2.6B in
market value) as collateral - the stock needs to be above 9 for Citigroup to
get fully paid off.
o Citi
loans money at an egregiously cheap rate (LIBOR+50bps) b/c Citi doesn't want
GGP to go bust. Citi gets big fees on
its commercial banking relationship w/ GGP, plus transactional fees.
o Citi
must get repaid in November 2009 though, establishing a time limit on when
things need to stabilize by.
o JB
is willing to borrow money b/c he knows he is getting an effective arbitrage -
his "purchase" required no capital and is relatively small, but will
create a much larger buyer of the stock.
·
With JB's purchase
compete, the buyer is comfortable enough to move forward with his big purchase
of stock [if he is comfortable with this arrangement]
·
Matthew Bucksbaum, a little nervous about this whole
structure, sells 1.5M shares worth of his stake in MB Capital so that he can
have some portion of shares which is fairly secure.
Back in 2004 when GGP bought the Grand Shoppes from LVS,
it committed to purchasing the Palazzo upon completion. The Palazzo
was pre-sold at that time, and has opened fairly recently. As recently
as January 2008, LVS was saying that they expect $500M as an initial
payment. On February 11 2008, GGP said in its 8-K release of the
fiscal year results that it expected the initial payment to be $349M.
Suddenly today, it is announced that the initial payment will actually
be $290M. A "source" provided some information to 2 local newspapers,
saying:"We would have loved to see the mall open all at one time," the source
said. "It is about construction, not about lack of tenants."This very much sounds like a representative of GGP. In fact, I am sure
that it was GGP. Why would anyone else love to see the mall open all
at one time? If LVS were to say that, it would be a non-statement --
of course LVS would love to get paid in full up front. It was probably
Bernie Friebaum. It makes them sound bad to reveal this information
anonymously, and note the strong emphasis on "this is not the
underlying demand - it's construction delays". Defensive.Now, the number of payments will increase from 4 to 7, and the eventual
total payment should be the same. Previously, additional payments were
to be made in months 12, 24 and 30. Now, they will be made in months
4, 8, 12, 18, 24 and 30.My belief is GGP is running low on cash in the short run, and is doing
what it can to defer payments where possible. This retooled agreement
allows GGP to defer payment a bit longer, but once again does not allow
them off the hook.
Historical Ownership of General Trust Company Massive spike in ownership in 2004,
but has no explanation as to why. I
looked through every filing which says "general trust" in that time
period.Year Ownership Partnership shares 2007 67.64 45.33 2006 59.55 45.33 2005 59.37 45.33 2004 59.58 45.33 2003 - A 53.97 45.33 [filed 4/5/2004] [200.9M shares outstanding as of
12/31/2003 - share count does not account for this increase.]2003 17.41 15.11 [filed 11/20/2003] [186.5M shares outstanding as of
12/31/2002]2002 16.30 15.11 2001 18.40 18.06 2000 15.04 14.71 1999 14.76 14.58 1998 9.91 9.39 1997 7.88 7.36
Main
Takeaways
·
GGP's management is
being aggressive at best and XXXXXXXXXX at worst, borrowing money in their
family trust to get someone else to buy stock.
·
There may be extra
layers of liability which we are unable to see on GGP's financials.
·
The Chairman Emeritus
of GGP has signaled it is possible his trust will blow up by redeeming part of
his interest in MB Capital for underlying shares.
·
Citigroup is also being
aggressive at best and XXXXXXXXX at worst by loaning GGP's management team money
at LIBOR+50bps just so that the management can buy stock in GGP.
·
*Why is GGP not
releasing who the big lender is???* Something is going on here.
What
is Happening Here
·
John Bucksbaum knows
that GGP has a leverage problem. He would
like to de-lever, but he needs entities to step up to the plate willing to buy
large amounts of stock.
·
JB finds someone who is
averse to buying outright, but is willing to buy $734M of stock if JB buys a
substantial amount of stock at the same price.
·
JB goes to Citigroup
and borrows $88M to "buy" stock.
o Citigroup
is willing to loan the money b/c it has MB Capital's 67M shares ($2.6B in
market value) as collateral - the stock needs to be above 9 for Citigroup to
get fully paid off.
o Citi
loans money at an egregiously cheap rate (LIBOR+50bps) b/c Citi doesn't want
GGP to go bust. Citi gets big fees on
its commercial banking relationship w/ GGP, plus transactional fees.
o Citi
must get repaid in November 2009 though, establishing a time limit on when
things need to stabilize by.
o JB
is willing to borrow money b/c he knows he is getting an effective arbitrage -
his "purchase" required no capital and is relatively small, but will
create a much larger buyer of the stock.
·
With JB's purchase
compete, the buyer is comfortable enough to move forward with his big purchase
of stock [if he is comfortable with this arrangement]
·
Matthew Bucksbaum, a little nervous about this whole
structure, sells 1.5M shares worth of his stake in MB Capital so that he can
have some portion of shares which is fairly secure.
