Pershing Square bought General Growth in bankruptcy and shareholders kept $5.2B

In late 2008 General Growth Properties, the second-largest US mall owner, could not refinance roughly $11.8 billion of debt maturing through 2012. The company was solvent — its 185 malls still collected rent — but on April 16, 2009 it filed Chapter 11, and the conventional ending was a fire sale. Bill Ackman's Pershing Square took the other side of that bet.

Pershing bought the stock and unsecured notes at distressed prices while the market priced the equity at zero, reaching a 25 percent economic stake, and Fairholme Capital, the largest unsecured creditor, joined it. Their proposal was not a rescue loan: commit new equity, pay every unsecured creditor at par, and let existing shareholders keep value.

The plan confirmed on October 21, 2010 did exactly that: bondholders were repaid, and existing shareholders received more than $5.2 billion of new equity. Brookfield, Fairholme and Pershing put up about $7 billion of fresh capital, and General Growth exited as two public companies — the mall REIT and Howard Hughes Corporation.

All bondholders repaid and shareholders kept more than $5.2B of equity; GGP split into GGP and Howard Hughes, and Brookfield paid $23.50 a share in 2018

The losses were a refinancing problem, not an operating problem: the malls kept earning rent while the debt market was shut.

The thesis was written down before the outcome — Pershing accumulated its stake while the market priced the equity at zero and published its case in advance.

Rejecting a sale of the whole company preserved the upside for existing owners; new capital came in at $10 a share instead.

The capital structure was rebuilt around what the assets could support: par recovery for creditors, a split that separated earning malls from non-earning land.

A solvent company felled by a refinancing wall is worth more reorganized than sold at the bottom — equity priced as zero is an option, and someone has to buy it before anyone knows.

General Growth emerged in November 2010 as two listed companies — the mall REIT and Howard Hughes Corporation (HHC). In March 2018 Brookfield agreed to buy the rest of GGP for $9.25 billion, offering shareholders $23.50 a share in cash or Brookfield units. The equity Pershing bought in the depths had become the controlling stake in America's second-largest mall owner.