Ackman Expects GGP To File Bankruptcy "Imminently"

Bill Ackman is all over the news today, first TGT now GGP. Bloomberg quotes the scourge of MBIA/Allied Capital as saying he "expects the shopping-mall owner to file for bankruptcy imminently." In a BTV interview earlier, Ackman had said Pershing Square had taken stakes that would give it a 25% equity position, and that he advocates a bankruptcy in which "the equity survives intact."

“Most of the time, insolvent companies go bankrupt. It’s rare for a solvent company to go bankrupt. This is a solvent company with a liquidity problem. I don’t see a scenario in which the company can reorganize outside of bankruptcy. So I expect it to file imminently, you know, the next few days unless they get some kind of extension, but certainly sometime this year.”

Ominously, Ackman warned that a GGP liquidation would be a "disaster for the entire REIT market." Ackman's thesis that there is implicit equity value in GGP may be flawed if the rate of defaults of retail tenants continues to grow exponentially, implying a liquidation may be in the works despite his wishes. Ackman, who had previously been on the dot in his evaluation of bloated financial companies (MBIA, ALD), has been surprisingly wrong when evaluating investments that have a real-estate component to them, Target being the most recent notable. For the sake of all GGP stakeholders, he better be right in his assessment of General Growth Properties.