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Fund Times

Fairholme's Berkowitz Weighs in on Simon's bid for General Growth Properties

Morningstar's Domestic Stock Fund Manager of the Decade patiently exploring his options.

Bruce Berkowitz today informed Morningstar that Fairholme Capital, advisor to the Fairholme fund, is the majority owner of a tranche of General Growth Properties' bank debt and a series of its convertible debt. Berkowitz says Fairholme also owns a chunk of debt from The Rouse Company, one of General Growth's internal divisions. He says Fairholme Capital has retained bankruptcy attorneys to represent its shareholders' interests as the second-largest domestic mall operator tries to emerge from bankruptcy while addressing an unsolicited takeover bid from Simon Property Group (SPG).

Berkowitz say he isn't looking for a one-time, short-term gain. Helping General Growth emerge from bankruptcy as healthy as possible without a takeover and with the ultimate conversion of Fariholme's stake into equity is an appealing option according to Berkowitz.

Berkowitz cites an earlier deal with  AmeriCredit Financial  as the sort of win-win situation that could be an option with General Growth. In late 2008, Fairholme exchanged its senior AmeriCredit debt for new equity in the company, providing much needed liquidity while locking in favorable terms for Fairholme shareholders. AmeriCredit's stock price has more than quadrupled since the deal.