Objection by General Growth's Unsecured Creditors to Exclusivity

8/14/2019 Objection by General Growth's Unsecured Creditors to Exclusivity

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AKIN GUMP STRAUSS HAUER & FELD LLPOne Bryant ParkNew York, New York 10036(212) 872-1000 (Telephone)(212) 872-1002 (Facsimile)

Michael S. StamerAbid Qureshi

AKIN GUMP STRAUSS HAUER & FELD LLP1333 New Hampshire, N.W.Washington, DC 20036(202) 887-4000 (Telephone)(202) 887-4288 (Facsimile)James R. SavinDavid M. Dunn

Counsel for the Official Committee of Unsecured Creditors

UNITED STATES BANKRUPTCY COURT

SOUTHERN DISTRICT OF NEW YORK

In re:

General Growth Properties, Inc., et al.,

Debtors.

Chapter 11

Case No. 09-11977 (ALG)

(Jointly Administered)

OBJECTION OF THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS

TO DEBTORS MOTION PURSUANT TO SECTION 1121(d) OF THE BANKRUPTCY

CODE REQUESTING A SECOND EXTENSION OF EXCLUSIVE PERIODS FOR

FILING A CHAPTER 11 PLAN AND SOLICITATION OF ACCEPTANCES THERETO

The Official Committee of Unsecured Creditors (the Creditors Committee) of General

Growth Properties, Inc. (GGP) and its affiliated debtors and debtors in possession

(collectively, with GGP, the Debtors), by and through its undersigned counsel, hereby files this

objection (the Objection) to the Debtors Motion Pursuant to Section 1121(d) of the

Bankruptcy Code Requesting a Second Extension of Exclusive Periods for Filing of a Chapter 11


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Plan and Soliciting Acceptances Thereof (the Second Exclusivity Motion).1 In support of this

Objection, the Creditors Committee respectfully submits as follows:

PRELIMINARY STATEMENT

1. By the Second Exclusivity Motion, the Debtors request a second six-monthextension of their exclusive periods to file a plan of reorganization and solicit acceptances

thereof (the Exclusive Periods), through and including August 26, 2010 and October 26, 2010,

respectively. The request for a second extension of the Debtors Exclusive Periods should be

denied for the following reasons:

the Debtors have failed to make sufficient progress on the TopCo Restructuring tojustify a further six-month extension of exclusivity;

the Debtors are attempting to use an extension of their Exclusive Periods to forceupon their creditors a lengthy and uncertain Capital Raise/M&A Process, ratherthan pursue a transaction that would guarantee the Debtors creditors with cashpayment in full and provide their equity holders with a substantial distribution;

the Debtors are ignoring their fiduciary duty to creditors by attempting to hire theEquity Committees former financial advisor to pursue a Capital Raise/M&AProcess designed solely to benefit equity holders at great risk to creditorsrecoveries; and

the Debtors have abandoned the cooperative and transparent process utilized inconnection with the Property-Level Restructuring in favor of a process that seeksto exclude the Creditors Committee.

2. First, the Debtors have failed to make sufficient progress on the TopCoRestructuring. In an attempt to show progress, the Debtors assert in the Second Exclusivity

Motion that they have been proceeding, in coordination with the Creditors Committee, along a

deliberate two-stage strategy. Second Exclusivity Motion, p. 2, 2. This is not true. At the

First Exclusivity Hearing, the Creditors Committee unequivocally stated that its support for the

1 The facts and circumstances described in this Objection reflect the Creditors Committees knowledge asof 10:00 am (ET) on February 24, 2010. To the extent the facts and circumstances change prior to the hearing onthe Second Exclusivity Motion, the Creditors Committee hereby reserves its rights to supplement this Objection.


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first six-month extension of the Exclusive Periods was predicated on the Debtors intent to

pursue the Project-Level Restructuring and the TopCo Restructuring simultaneously, so TopCo

creditors were not sitting idly by in the interim. The Debtors echoed the Creditors Committees

sentiments, creating a record that the process would not be bifurcated. The Court also agreed

with the Creditors Committee, granting the Debtors First Exclusivity Motion with the caveat

that the case as a whole could not be ignored.

3. Subsequently, the time parameters that the Debtors Property-Level secured lendersand servicers insisted upon in connection with the Property-Level Restructuring necessitated a

de-coupling of the Property-Level and TopCo Restructurings, but only for purposes of

proceeding on dual (rather than the same) tracks. The Creditors Committee never endorsed a

two-stage strategy whereby the Debtors would complete the Property-Level Restructuring at the

expense of any progress on the TopCo Restructuring.

4. The Debtors also contend that TopCo Restructuring progress has been madebecause the TopCo plan negotiations have already begun and are continuing on what the Debtors

describe as a strategically planned path. Second Exclusivity Motion, p. 9, 20. The Creditors

Committee is unaware of any facts supporting this statement. The Second Exclusivity Motion

lacks any facts that show progress towards proposing, or even beginning negotiations on, a plan

for the TopCo Debtors. The Debtors, only in the past few days, and the Creditors Committee

believes only because the hearing on the Second Exclusivity Motion was approaching, delivered

a long-term business plan, a first step in developing a TopCo plan of reorganization. To the

Creditors Committees knowledge, no term sheets have been circulated, no draft plans have been

exchanged and no negotiating sessions have occurred or even been requested. Moreover, the

Debtors state in the Second Exclusivity Motion that they do not anticipate beginning to negotiate


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a TopCo plan for at least another three months because they first intend to complete the Capital

Raise/M&A Process. The Debtors unsupported assertions of progress with respect to a TopCo

plan of reorganization do not constitute cause supporting another lengthy extension of the

Exclusive Periods.

5. Second, the Debtors are using exclusivity to force upon their creditors a planprocess to which the Creditors Committee objects. The Debtors have chosen a strategic path for

the TopCo Restructuring that contemplates a Capital Raise/M&A Process that will unfold over

several months instead of pursuing a currently available transaction, subject to higher and better

offers, that would guarantee payment in full in cash to the Debtors TopCo unsecured creditors

and a material distribution to equity holders. Moreover, during the Capital Raise/M&A Process

the Debtors estates will likely incur professional fees of approximately $9 million monthly2 and

interest will continue accrue on the Debtors TopCo unsecured debt at a rate of approximately

$34 million monthly.

6. The Debtors received from Simon Property Group, Inc. (Simon) an unsolicited,firm and fully financed $10 billion offer, including $9 billion in cash, that will provide a full

recovery in cash to all TopCo unsecured creditors and a cash and other asset distribution to the

Debtors equity holders valued at approximately $9 dollars a share (the Simon Proposal). The

Debtors, however, have declined to engage with Simon or even allow Simon to perform the 30-

day confirmatory diligence it has requested. Simon has publicly stated that it has tried for many

months to engage the Debtors to explore a transaction, only to be repeatedly rebuffed and

indefinitely put off. Equally troublesome is that the Debtors, without consulting the Creditors

2 The Debtors have incurred approximately $90 million in professional fees during the first ten months ofthese chapter 11 cases, without taking into account the tens of millions in success fees due upon emergence.


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Committee, issued a press release rejecting the Simon Proposal as not sufficient to preempt the

lengthy Capital Raise/M&A Process proposed by the Debtors.

7. The Debtors have represented to this Court that all creditors will be paid in full andequity will realize a significant distribution. The Creditors Committee hopes that this will occur,

however, the Debtors statements are far from a guarantee. The market volatility over the last ten

months that resulted in the Debtors stock and debt trading up significantly can just as easily

reverse itself to the detriment of TopCo creditors recoveries. TopCo creditors should not be

forced to bear the risk that the improvement in trading prices of the Debtors unsecured debt and

equity securities and overall improvement in the capital markets is reversed, and current options

disappear or significantly worsen. As such, the Creditors Committee opposes an extension of

the Debtors Exclusive Periods that would allow the Debtors to continue to ignore attractive and

currently available restructuring options, such as the Simon Proposal, in order to embark upon a

lengthy and uncertain Capital Raise/M&A Process.

8. Third, the Debtors, through the Capital Raise/M&A Process, are ignoring theirfiduciary duty to creditors and risking a full cash recovery solely in an attempt to inflate value

for their equity holders. Given the amount of equity represented by current members of the

Board of Directors (members represent approximately 50% of the Debtors equity interests), the

fact that the Debtors are currently seeking to hire the Equity Committees former financial

advisor and, as explained below, the Debtors 180-degree shift away from the cooperative and

transparent strategy utilized in connection with the Project-Level Restructuring, the Creditors

Committee believes that the Debtors intend, through the Capital Raise/M&A Process, to raise

only the minimum amount of capital needed to achieve a TopCo emergence from chapter 11 and

to equitize large portions of TopCo unsecured debt at an artificially high equity value. This


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equitization would be pursued in lieu of M&A proposals such as the Simon Proposal that would

provide a full cash recovery to TopCo unsecured creditors and a material distribution to equity

holders, but would also likely require a change in control of the Debtors. An extension of the

Exclusive Periods for this purpose is inappropriate and unreasonable.

9. Fourth, instead of pursuing a cooperative and transparent process, such as was thecase with the Property-Level Restructuring, the Debtors have already demonstrated that they

intend to restrict the Creditors Committee from involvement and visibility with respect to the

Capital Raise/M&A Process. For example, the Debtors, over the Creditors Committees

objection, have been trying to force potential investors to sign an onerous form of non-disclosure

agreement that, among other things, prohibits potential investors from (i) making alternative

proposals if their proposal is not chosen by the Debtors, and (ii) communicating with the

Creditors Committee or its professionals. The Debtors have also refused to commit to

involving the Creditors Committee in substantive aspects of the Capital Raise/M&A Process and

keeping the Creditors Committee apprised of substantive developments during such process.

10. The Debtors should not be granted the ability to leave their TopCo creditorconstituency functionally in the dark for at least the next three months and, at the end of the

Capital Raise/M&A Process, present a TopCo Restructuring solution that may very well be

unacceptable to the Creditors Committee and TopCo creditors. At best, the Debtors solution

will not have been informed by an interactive and transparent process. At worst, the Debtors

solution will indeed be unacceptable and will result in costly delay while the Debtors retool their

solution and/or litigate to try to force their solution upon TopCo creditors.

11. As in every case, a cooperative and transparent process is necessary and has amuch greater chance of resulting in both consensus with respect to the TopCo Restructuring and


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maximizing value for stakeholders. The Debtors concede as much multiple times in the Second

Exclusivity Motion when citing the success of the Project-Level Restructuring. The Court

should not extend the Exclusive Periods in order to permit the Debtors to run a non-transparent

and non-inclusive Capital Raise/M&A Process.

12. For these reasons, and those set forth below, the Creditors Committee respectfullyrequests that this Court deny the Debtors request for a second six-month extension of their

Exclusive Periods.

BACKGROUND

I.

Procedural Background

13. On April 16, 2009 (the Petition Date), and continuing thereafter, each Debtorfiled a voluntary petition for relief under chapter 11 of title 11 of the United States Code (the

Bankruptcy Code). The Debtors chapter 11 cases have been consolidated for procedural

purposes only and are being jointly administered pursuant to Rule 1015(b) of the Federal Rules

of Bankruptcy Procedure (the Bankruptcy Rules). The Debtors are authorized to continue to

operate their businesses and manage their properties as debtors-in-possession pursuant to

sections 1107(a) and 1108 of the Bankruptcy Code.

14. On April 25, 2009, pursuant to section 1102 of the Bankruptcy Code, the UnitedStates Trustee for the Southern District of New York (the U.S. Trustee) appointed the

Creditors Committee. The Creditors Committee currently consists of eleven members.3

On

September 8, 2009, the U.S. Trustee appointed the Official Committee of Equity Security

Holders (the Equity Committee).

3 The following entities comprise the Committee: American High-Income Trust, The Bank of New YorkMellon Trust Co., Eurohypo AG, New York Branch, Fidelity Fixed Income Trust, Fidelity Strategic Real ReturnFund, Fidelity Investments, Macys Inc., Taberna Capital Management, LLC, Wilmington Trust, General ElectricCapital Corp., Millard Mall Services, Inc., Luxor Capital Group, LP and M&T Bank.


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II. The First Exclusivity Motion15. On July 2, 2009, the Debtors filed a motion seeking a six-month extension of their

Exclusive Periods (the First Exclusivity Motion), which was heard by this Court during a

hearing held on July 28, 2009 (the First Exclusivity Hearing). At the First Exclusivity

Hearing, the Creditors Committee stated that its support for the First Exclusivity Extension was

predicated on the Debtors intent to pursue the Project-Level Restructuring and the TopCo

Restructuring simultaneously. See Hrg Tr. 55: 8-15, July 28, 2009 (Your Honor, there was an

argument . . . about the need to do this in a two-step process, that [the Debtors] should work on

the property companies first and then work on what weve called Top Co. Your Honor, and I

believe the Debtors agree with the [Creditors] Committee that the appropriate way to address

these issues is to address them at the same time. That the Top Co. creditors should not and are

not sitting idly by . . . .). The Debtors agreed, noting I dont think we can bifurcate [the

Project-Level and TopCo Restructuring]. I echo [the Committees] point. Id. at 60: 3-4. At the

conclusion of the First Exclusivity Hearing, the Court, with the direction that the case as a

whole cannot be ignored (id. at 62: 18), granted the Debtors an extension of the Exclusive

Periods to and including February 26, 2010, and April 23, 2010, respectively (the First

Exclusivity Extension).


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III. The Project-Level Restructuring16. Beginning on December 15, 2009, and continuing on December 22, 2009, January

20, 2010 and February 16, 2010, the Court confirmed plans of reorganization for 219 Debtors

(collectively, the Project-Level Debtors). In particular, the Project-Level Debtors plans

include settlements with a number of their secured lenders that generally provide for extensions

and laddering of the maturities (at the non-default contract rate of interest) of approximately

$11.6 billion in secured Project-Level debt (the Project-Level Restructuring). As noted by the

Debtors, the Project-Level Restructuring was the direct result of the Debtors transparency and

their cooperative relationship with each constituency and their professionals. See Hrg Tr. 23-24:

23-3, Dec. 15, 2009 ([The Project-Level Restructuring] is . . . a testament to . . . the

transparency of our negotiating process and . . . the tireless commitment of the businesspeople

and the advisors involved.).

IV. The TopCo Restructuring17. In contrast to the success of the Project-Level Restructuring, the Debtors have not

made any material restructuring progress with respect to a plan or plans of reorganization for

GGP, GGP Limited Partnership, GGPLP LLC, The Rouse Company LP, and a

number of parent holding companies (collectively, TopCo or the TopCo Debtors and the

TopCo Restructuring). The Debtors lack of progress comes despite having all necessary

resources and representing to this Court during the First Exclusivity Hearing that they would

pursue a dual-track reorganization process for the Top-Co and Project-Level Debtors. See,

e.g., Hrg Tr. 21: 16-19, July 28, 2009 ([T]he Debtors [goal is] to develop acomprehensive

plan of reorganization that would try to resolve the multiple plan issues. And that, Your Honor,

is exactly what we hoped [sic] to do in the next six months.) (emphasis added). Evidence of the

lack of progress by the Debtors is the fact that it took the Debtors nearly 10 months in order to


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produce a long term business plan (the Business Plan). The Debtors have also yet to engage

the Creditors Committee in any material TopCo Restructuring discussions, nor have they made

any proposals or circulated any term sheets that would establish a baseline for TopCo

Restructuring negotiations.

V. The Proposed Capital Raise/M&A Process18. The Debtors represent in the Second Exclusivity Motion that they are

contemplating potential TopCo Restructuring options, including a standalone restructuring,

which will include an evaluation of traditional and non-traditional forms of exit financing or

capital, as well as [the M&A] or other change of control transactions with financial and strategic

investors. Second Exclusivity Motion, p. 4, 5. While the Creditors Committee supports, in

principle, an efficient and appropriate exploration by the Debtors of capital raise and M&A

options (collectively, the Capital Raise/M&A Process), all indications are that the Debtors

intend to proceed in a unilateral and non-transparent manner over a three-month period, rather

than attempting to capitalize immediately on existing TopCo Restructuring options, such as the

Simon Proposal.

A. Discussions Regarding a Non-Disclosure Agreement19. The Debtors clearly signaled they were abandoning an open and transparent

relationship with the Creditors Committee when the Creditors Committee received drafts of a

form of non-disclosure agreement (the NDA) the Debtors proposed to send to interested

investors in connection with the Capital Raise/M&A Process. Consistent with the Creditors

Committees mandate that the Capital Raise/M&A Process be transparent and inclusive of the

Creditors Committee, as the fiduciary for TopCo unsecured creditors, the Creditors

Committees professionals provided substantive feedback to the Debtors professionals on the

NDA.


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20. There were three principal provisions in the NDA that the Creditors Committeefound particularly objectionable and unreasonable: (i) the NDA contained a standstill provision

that, among other things, prohibited each potential investor, whether or not they invested in the

Debtors, from acquiring, seeking to acquire, or proposing or agreeing to acquire ownership of the

Debtors debt or equity securities until six months after this Court confirmed a plan of

reorganization;4 (ii) the NDA did not permit potential investors to propose alternative

transactions; and (iii) the NDA did not allow the Creditors Committee or other stakeholders to

participate in the Capital Raise/M&A Process.

21.

Despite the Creditors Committees feedback, the Debtors sent what they described

as the final version of the NDA to the Creditors Committee that rejected substantially all of

the Creditors Committees comments. Consequently, the Creditors Committees advisors

requested, both orally and in writing to the Debtors Board of Directors, management team and

advisors, that the Debtors reconsider their position on launching the Capital Raise/M&A Process

with the NDA. Over the Creditors Committees objection, the Debtors distributed the NDA to

certain third parties and advised the Creditors Committee on February 5, 2010 that they intended

to execute the NDA with at least one potential investor.

22. On February 23, 2010, the day prior to the filing deadline for this Objection, theDebtors circulated a further revised NDA in which they attempt to address several of the

provisions the Creditors Committee found objectionable and unreasonable. There are, however,

remaining issues with the NDA.

4 The Debtors financial advisor, Miller Buckfire, recently characterized a comparable standstill provisionin another chapter 11 case as unreasonable and non-market. See Declaration of Samuel Greene in Support ofStatement of Starwood Regarding Debtors Motion Pursuant to Section 1121(d) of the Bankruptcy Code RequestingSecond Extension of Exclusive Periods for the Filing of a Chapter 11 Plan and Solicitation of Acceptances Thereof(the Greene Declaration), In re Extended Stay Inc., et al., Case No. 09-13764 (JMP) (Bankr. S.D.N.Y. Jan. 13,2010) [Docket No. 716]. A copy of the Greene Declaration is attached hereto as Exhibit A.


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B. Discussions Regarding Capital Raise/M&A Process Parameters23. In connection with the discussion relating to the NDA, the Debtors and the

Creditors Committee also discussed a protocol through which the Creditors Committee, Equity

Committee and certain informal groups of creditors and the Debtors would participate in the

Capital Raise/M&A Process. The protocol would have acknowledged that the Debtors would

run the Capital Raise/M&A Process, but sought to ensure transparency and involvement by the

non-Debtor parties, including keeping the Creditors Committee involved in substantive aspects

of the process and apprised of substantive developments in a timely manner. Despite the parties

efforts to reach agreement on a protocol, no agreement was reached.

OBJECTION

I. The Legal Standard for Extending a Debtors Exclusive Periods24. Section 1121 of the Bankruptcy Code limits the period of time during which a

debtor has the exclusive right to file a plan of reorganization and solicit acceptances thereof to

120 and 180 days, respectively. See 11 U.S.C. 1121(b) and (c). Once these initial periods

expire as they did six months ago for the Debtors a debtor may only extend its exclusive

periods upon meeting its burden of showing cause for such an extension. See 11 U.S.C.

1121(d);5 see also In re Curry Corp., 148 B.R. 754, 756 (Bankr. S.D.N.Y. 1992) (debtor must

make a clear showing of cause to support an extension of the exclusivity period).

25. It is well-established that a request to either extend or reduce the period ofexclusivity is a serious matter and such a motion should be granted neither routinely nor

cavalierly. In re All Seasons Indus., Inc., 121 B.R. 1002, 1004 (Bankr. N.D. Ind. 1990)

5 Such extensions for cause are limited to 18 months from the petition date with respect to filing a plan ofreorganization, and 20 months from the petition date with respect to soliciting and obtaining acceptance of any suchplan.


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(quoting In re McLean Indus., Inc., 87 B.R. 830, 834 (Bankr. S.D.N.Y. 1987)); see also In re Pine

Run Trust, Inc., 67 B.R. 432, 434 (Bankr. E.D. Pa. 1986) (both the language and purpose of

[Section1121(d)] require that an extension not be granted routinely); In re Parker St. Florist &

Garden Ctr., Inc., 31 B.R. 206, 207 (Bankr. D. Mass. 1983) (the [c]ourt should not routinely

grant an extension). Indeed, at the First Exclusivity Hearing, this Court noted that, in

requesting their first six-month extension, the Debtors were requesting a period that is more

substantial than would ordinarily be granted in a request for extension of exclusivity. Hrg Tr.

62:11-12, July 28, 2009.

26.

Here, the Debtors are seeking their second six-month extension of their Exclusive

Periods, an extension that would end two months prior to the statutory maximum extension of

the Exclusive Periods. At the end of the proposed extension of the Exclusive Periods, these

chapter 11 cases will have been pending 19 months. Consequently, the Debtors must satisfy a

significantly increased burden to justify a second lengthy extension of exclusivity. See In re

Mirant Corp., No. 4-04-CV-476-A, 2004 WL 2250986, at *2 (N.D. Tex. Sept. 30, 2004) (The

debtors burden gets heavier with each extension it seeks as well as the longer the period of

exclusivity lasts.); In re Dow Corning Corp., 208 B.R. 661, 664 (Bankr. E.D. Mich. 1997)

(noting that a debtors burden gets heavier with each extension and a creditors burden to

terminate gets lighter with the passage of time).


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contingencies; (iv) they require an extension of exclusivity to maximize value; and (v) they are

paying their bills as they become due. See Second Exclusivity Motion, pp. 10-19, 22-39.

When balancing the Adelphia Factors cited by the Debtors, however, it is clear that the facts

militate against approval of a second six-month extension of the Exclusive Periods.

A. The Current Size and Complexity of the Debtors Cases Does Not Support anExtension of Their Exclusive Periods

29. By their own admission, the Debtors have not sought to effect any materialoperational restructuring through these chapter 11 cases. See December 1, 2009 Disclosure

Statement for Plan Debtors Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy

Code [Docket No. 3659]. Instead, the Debtors have focused almost exclusively on a balance

sheet restructuring that, to date, has resulted in confirmed plans for 219 of the 388 Debtors,

representing in excess of $11.6 billion of secured debt. As a result, the only balance sheet

restructuring that remains are a few Project-Level secured loans and the TopCo unsecured debt.

Upon information and belief, the Debtors are making progress in their discussions with the

majority of their remaining Project-Level lenders. In addition, with respect to the TopCo

unsecured debt, the Debtors have received a firm offer from Simon that offers a simple and

efficient way to maximize value for all stakeholders and exit chapter 11. Accordingly, the

current size and complexity of the Debtors cases, as evidenced by the scope of the remaining

restructuring, does not support an extension of their Exclusive Periods. The Debtors attempt to

complicate unnecessarily these chapter 11 cases by running a lengthy and risky Capital

Raise/M&A Process does not change this fact.

30. Even if the Court finds that the current size and complexity of these cases militatesin favor of an extension of the Debtors Exclusive Periods, it is well established that [s]ize and

complexity alone cannot suffice as cause to extend exclusivity because a debtors size and


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during a large chapter 11 case. See, e.g., In re R.G. Pharmacy, Inc., 374 B.R. 484 (Bankr. D.

Conn. 2007) (Litigation with creditors is not an unusual circumstance, and the fact that

litigation is pending with creditors is not in itself sufficient cause to justify an extension of the

exclusivity period. Only under extreme circumstances would the existence of litigation

constitute cause for an extension.) (emphasis added). Moreover, while defeating the motions to

dismiss was integral to the continuation of these chapter 11 cases, the litigation was completed

more than six months ago, just after this Court granted the Debtors First Exclusivity Motion. An

additional six-month extension of the Exclusive Periods is not justified based on an event that

occurred six months ago.

35. The Debtors have also enjoyed the services of a host of professionals with whomto address these issues, and the Debtors fail to cite any support for how performing typical debtor

in possession functions constitutes progress towards reorganization under the rubric of the

Adelphia Factors.

ii. The Debtors Fail to Cite any Progress Towards the Development of aConsensual TopCo Plan

36. Other than the Debtors statement in the heading of section VI.C. of the SecondExclusivity Motion, and their (incorrect) claim in the preliminary statement that the TopCo plan

negotiations have already begun, the Second Exclusivity Motion omits any discussion or

evidence of the progress they have made towards the development of a consensual plan. To the

contrary, it is easy to list what the Debtors did not do during the First Exclusivity Extension: (i)

the Debtors did not deliver the Business Plan until a week prior to the end of the First Exclusivity

Extension; (ii) the Debtors did not circulate a TopCo Restructuring term sheet; (iii) the Debtors

did not circulate a draft plan or plans of reorganization for the TopCo Restructuring; and (iv) the


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Debtors did not make or offer TopCo plan presentations to the Creditors Committee, or request

or schedule meetings or negotiating sessions with respect thereto.

37. The Debtors also failed, until last week, to even begin producing data regardingtheir businesses going forward, other than a ten year cash flow based on maintaining the status

quo, such as proposed strategic initiatives, acquisitions, dispositions, joint ventures, cost

reduction plans and capital expenditures, which data is necessary to facilitate plan discussions.

Simply put, the Debtors have not articulated to parties in interest how they intend to reorganize

and exit chapter 11.

38.

In addition, the Debtors have obstructed progress on a consensual TopCo plan by

insisting for months on using an onerous form of NDA that (i) precludes the Creditors

Committees participation in the Capital Raise/M&A Process and (ii) is unacceptable to Simon

and likely other potential investors.6 The Debtors statements in the Second Exclusivity Motion

regarding the progress towards a consensual TopCo plan are inconsistent with their actions to

date and do not support an extension of their Exclusive Periods.

C. The Only Unresolved Contingencies Are of the Debtors Own Making and DoNot Justify an Extension of the Debtors Exclusive Periods

39. The Debtors make vague allegations that several contingencies exist that justifytheir requested extension of the Exclusive Periods. Second Exclusivity Motion, p. 17, 34.

These contingencies are illusory, however, because the Debtors are not currently facing any

meaningful litigation or other unique unresolved hurdles that preclude the filing of a TopCo plan

6 Simon has described the NDA as containing unreasonable restrictions. See Simons February 19, 2010Press Release, a copy of which is attached hereto as Exhibit B. Simon has also stated that while it is willing to agreeto customary undertakings to preserve confidentiality, it is not willing to agree to any restriction on [its] rightto make proposals at any time or to otherwise speak freely, including to all of General Growths stakeholders, or toagree to any other standstill or similar provision. See Simons February 17, 2010 Press Release, a copy of which isattached hereto as Exhibit C.


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of reorganization. See, e.g., In re Fountain Powerboat Industries, Inc., No. 09-07132-8-RDD,

2009 WL 4738202, at *5 (Bankr. E.D.N.C. Dec. 4, 2009) (citing pending appeals and pending

litigation as issues that could be classified as unresolved contingencies); In re R.G. Pharmacy,

374 B.R. at 484 (citing an ongoing government Medicaid investigation as an unresolved

contingency, but denying an exclusivity extension because [t]he court is not persuaded that the

contingencies noted are cause for granting the extension, particularly in light of the breakdown

of negotiations between the parties); In re Tripodi, No. 04-30793, 2005 WL 2589185, at *2

(Bankr. D. Conn. Feb. 18, 2005) (denying a debtors motion to extend exclusivity premised upon

an unresolved contingency, and finding, despite a pending appeal, a Plan could readily have

been formulated and proposed during the pendency of the Appeal rather than the debtor simply

awaiting an appellate court ruling).

40. The Debtors major unresolved issue is the TopCo Restructuring, which is asituation entirely of the Debtors own making. Contrary to the Debtors statements to the Court

in support of the First Exclusivity Extension that they would pursue simultaneous Property-Level

and TopCo Restructurings, the Debtors made the choice, without the support of the Creditors

Committee, to halt their efforts towards the TopCo Restructuring during the First Exclusivity

Extension.

41. The Debtors assert that certain activities relating to the TopCo Restructuring and, inparticular, the Capital Raise/M&A Process are contingencies that require an extension of their

Exclusive Periods. Specifically, the Debtors cite selecting a transaction type, sourcing financing,

and evaluating, negotiating and preparing a plan of reorganization and disclosure statement, as

contingencies. Id. at pp. 17-18, 35. The Debtors do not, however, provide any factual or legal

support for how these activities (in which almost every large chapter 11 debtor must engage)


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constitute unique contingencies that justify an extension of exclusivity. The fact that the Debtors

have chosen not to develop and negotiate the TopCo plan of reorganization cannot serve as a

contingency justifying an extension of exclusivity.

D. The Debtors Are Seeking to Extend Their Exclusive Periods to Force UponCreditors the Debtors Capital Raise/M&A Process

42. The Debtors note that one of the Adelphia Factors guiding courts in this District inevaluating a request for an extension of exclusivity is whether the debtor is seeking to extend

exclusivity to pressure creditors to accede to [the debtors] reorganization demands. Second

Exclusivity Motion, p. 9, 19 (citing Adelphia, 352 B.R. at 587). Indeed, one of the

fundamental purposes of section 1121 of the Bankruptcy Code is to limit the delay that makes

creditors the hostages of Chapter 11 debtors. In re Timbers of Inwood Forest Assocs., Ltd., 484

U.S. 365 (U.S. 1988).

43. In considering a debtors request to extend its exclusive periods, courts have statedthat an extension should not be used as a tactical measure to pressure creditors to accept a plan

they consider unsatisfactory. See, e.g., In re Gibson & Cushman Dredging Corp., 101 B.R. 405,

409 (Bankr. E.D.N.Y. 1989). The Debtors contend that this Court should extend the Exclusive

Periods because the Debtors requested extension is neither an attempt to pressure creditors to

accede to the Debtors demands nor a negotiation tactic. Second Exclusivity Motion, p. 18,

36. The Debtors support for this contention, however, is (i) a promise that the extension of their

Exclusive Periods will not be an excuse for the Debtors to delay or unnecessarily extend the

reorganization process, and (ii) a statement that regular and open communication with their

creditors has been and remains a fundamental goal. Id. at p. 18, 36-37.


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44. The Debtors statements are unsupported by their actions and the facts of thesecases. The Debtors are, in fact, attempting to use an extension of exclusivity to force upon

creditors a Capital Raise/M&A Process that the Creditors Committee does not support.

i. The Debtors Are Seeking an Extension to Embark Upon a Lengthy andUncertain Capital Raise/M&A Process, Which May Come at the Expense of

TopCo Unsecured Creditors Recoveries

45. The Debtors cite the need to give the marketplace . . . an opportunity to fairlyvalue General Growths enterprise before they can file a TopCo plan. Second Exclusivity

Motion, p. 2, 2. Courts have rejected the notion that exclusivity should be extended solely to

give debtors more time to file a plan. See, e.g., In re Grossingers Assoc., 116 B.R. 34, 36

(Bankr. S.D.N.Y. 1990). Moreover, the equity holders control over the Debtors and the Debtors

about face with respect to transparency and cooperation, lead to the conclusion that the Debtors

requested extension is, in fact, an excuse for the Debtors to delay and unnecessarily extend the

TopCo Restructuring in order to adopt a swing for the fences strategy for equity value over the

next six months.

46. The Debtors strategy carries risks and costs of delay that the Creditors Committeebelieves should not be borne by the Debtors creditors. Indeed, the Debtors assert that they will

need approximately six months before they can even file a TopCo plan of reorganization. The

Debtors have received the Simon Proposal, and potentially others, that will provide a full

recovery, in cash, to TopCo unsecured creditors and a significant cash and other asset distribution

to equity holders. Instead of immediately pursuing the Simon Proposal, the Debtors have

publicly stated, without consulting with the Creditors Committee, that Simons firm fully

financed $10 billion offer is not sufficient to preempt their Capital Raise/M&A Process and

stated that Simon needs additional information to help it get to a higher valuation. See


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F. An Examination of the Adelphia Factors Omitted from the Second ExclusivityMotion Further Militates Against Extending Exclusivity

55. Absent from the Second Exclusivity Motion is a discussion of the four additionalAdelphia Factors, each of which this Court should weigh in determining whether cause exists

sufficient to extend the Debtors' Exclusivity Periods. The additional factors are as follows:

(i) the necessity for sufficient time to permit the debtor to negotiate a plan of

reorganization and prepare adequate information;

(ii) whether the debtor has demonstrated reasonable prospects for filing a viable

plan;

(iii) whether the debtor has made progress in negotiations with its creditors; and

(iv) the amount of time which has elapsed in the case.

See In re Adelphia Commcns. Corp., 352 B.R. at 587. An examination of each of these factors,

given the facts and circumstances that currently exist and as described in detail herein, further

militates against granting the relief sought by the Second Exclusivity Motion.

III. Even if the Debtors Could Satisfy Their Burden to Show Cause for any Extension ofthe Exclusive Periods, a Six-Month Extension Is Excessive and Unwarranted

56. In the event that the Court finds that the Debtors have satisfied their increasedburden to show that cause exists to extend the Exclusive Periods for any length of time, the

Creditors Committee submits that a six month extension is excessive and unwarranted. The

Creditors Committee respectfully suggests that a thirty-day extension would be more

appropriate, with direction to the Debtors that during the extension period they are to: (i)

determine a stalking horse capital provider and/or acquirer to facilitate the TopCo Restructuring;

(ii) file a TopCo plan and disclosure statement; (iii) file a motion seeking approval of bid

procedures to subject the stalking horse proposal to higher and better proposals; (iv) engage with

Simon in good faith to progress the Simon Proposal, including, but not limited to, providing

access to the information Simon requires to complete its confirmatory due diligence and


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CONCLUSION

WHEREFORE, the Creditors Committee requests that the Court (i) deny the relief

requested in the Second Exclusivity Motion and (ii) provide the Creditors Committee such other

and further relief as the Court may deem just, proper and equitable.

Dated: February 24, 2010 Respectfully submitted,

/s/ Michael S. Stamer

Michael S. StamerAbid QureshiAKIN GUMP STRAUSS HAUER & FELD LLPOne Bryant Park

New York, New York 10036(212) 872-1000 (Telephone)(212) 872-1002 (Facsimile)

James R. SavinDavid M. DunnAKIN GUMP STRAUSS HAUER & FELD LLP1333 New Hampshire, N.W.Washington, DC 20036(202) 887-4000 (Telephone)(202) 887-4288 (Facsimile)

Counsel for the Official Committee of Unsecured

Creditors

Objection by General Growth's Unsecured Creditors to Exclusivity

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