Attorneys for Metropolitan Life Insurance Co. and KBC Bank N.V., a unit of KBC Groep N.V., wrote in their motion to dismiss entities related to White Marsh Mall in Maryland: "It is clear that the petitions of the White Marsh debtors were not filed with any reorganizational purpose; they were filed solely to obtain leverage and a tactical advantage in any future efforts to extend the maturity of the loan."It gets better...wait for it....
General Growth legally created its malls as special purpose entities (SPEs), separate from the parent company. This prevented it from being on the hook for any of the SPEs' obligations.
"In determining to underwrite the loan, MetLife and KBC relied on the separateness and credit worthiness of the borrower and the underlying property, especially because no parent company repayment guaranty was required," attorneys for White Marsh wrote.
The SPEs are governed by independent directors. But some of them, including SPEs related to Fox River Shopping Center in Wisconsin, say General Growth fired the independent directors minutes before the bankruptcy filing."Governed" really isn't the precise term. Usually the independent person(s) only step in to approve a bankruptcy or similar filing. But that's besides the point. Creditor-friendly judge or no, the firing of (possibly recalcitrant?) managers on that timeframe is very interesting, at say the least. Assuming that was permitted by the loan documents (and I have seen deals that would have allowed this so long as the new directors met the independence test), then there was some very good lawyering on GGP's behalf when the loans were documented.