Fitch: GGP Could Be Subject to "Material Ratings Actions"

Material rating actions on Fitch-rated U.S. commercial mortgage-backed securities transactions with significant exposure to General Growth Properties' assets are unlikely if GGP files for bankruptcy, according to Fitch Ratings. Fitch recently downgraded GGP's issuer default rating to 'C', indicating that it believes a default is imminent. "The likelihood for significant rating actions across transactions with GGP property exposure is slim given their strong performance, moderate leverage, and the bankruptcy remote nature of CMBS borrowers," according to Fitch managing director Susan Merrick. In the event of a GGP corporate bankruptcy, CMBS bondholders are protected by the bankruptcy-remote nature of CMBS borrowers. "A key factor limiting term default risk of CMBS loans in the event of a GGP bankruptcy is the strength of the current performance of the properties," said Fitch managing director Eric Rothfeld. "More than 75% of GGP loans rated by Fitch have actual debt service coverage ratios greater than 1.50 times and 67% are greater than 2.0 times." Meanwhile, Chicago-based GGP has refinanced approximately $896 million of mortgage loans. The maturity dates of these mortgage loans range from five to seven years. The proceeds were fully used to retire a $58 million bond issued by The Rouse Company LP that matured on Dec. 11, 2008, as well as to refinance approximately $814 million of mortgage indebtedness scheduled to mature in 2009. These refinanced loans are separate from the $900 million Fashion Show and Palazzo mortgage loans scheduled to mature on Dec. 12, 2008. However GGP said that it has not reached unanimous agreement with its syndicate of lenders to further extend the maturity date and is continuing its discussions with lenders.