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General Growth Paints Bleak Picture

General Growth acknowledges that it may seek bankruptcy protection with debt deadlines looming.

As retail stocks moved markedly lower on Wall Street Tuesday, the second largest U.S. mall owner, General Growth Properties Inc., said it may have to resort to bankruptcy as it struggles to meet debt obligations.

GGP shares fell 88 cents, or 64.2 percent, to end the New York Stock Exchange session at 49 cents, 99.1 percent below the 52-week high of $51.24 last Nov. 14.

The company warned in a filing with the Securities and Exchange Commission that it was at risk of bankruptcy with $958 million of debt scheduled to mature by Dec. 1 “that remains to be refinanced or extended.”

In addition, more than $3 billion in debt will come due next year. “Our potential inability to address our 2008 and 2009 debt maturities in a satisfactory fashion raises substantial doubts as to our ability to continue as a growing concern,” the firm said.

GGP stated that it was “working with its syndicate of lenders for the property secured debt (for Fashion Show and The Shoppes at The Palazzo, two of our premier Las Vegas properties) to extend the Nov. 28, 2008, maturity dates and is marketing The Grand Canal Shoppes and these properties for sale.”

The company, structured as a real estate investment trust, disclosed plans to put its three Las Vegas properties on the market last month. It also put all construction projects on hold except those nearing completion and has suspended a scheduled third-quarter dividend.

“We realize we need to generate billions to deleverage the company,” Adam Metz, interim chief executive officer, said on a conference call with analysts last week. “Sales transactions are an important part of our plan. Unfortunately, these transactions take time and until the deals are completed there is really nothing to announce. We hope to be able to report some transactions prior to yearend.”

Metz was named interim ceo and Thomas Nolan Jr. interim president last month after the company learned that former president Robert Michaels and former chief financial officer Bernard Freibaum received unsecured loans from a Bucksbaum family trust in order to cover margin calls on the purchase of company stock. John Bucksbaum then stepped down as ceo, but continues as chairman. Michaels relinquished the presidency, but continues as chief operating officer. Freibaum is no longer affiliated with the company.

Retail shares added significantly to the decline on Monday.

The Standard & Poor’s Retail Index fell 2.9 percent, or 7.66 points to 260.34 — adding to the previous day’s 5.58-point drop.

Among the retail stocks falling hardest were The Talbots Inc., down 10 percent to $4.95; Dillard’s Inc., 9.6 percent to $3.86; J. Crew Group, 7.5 percent to $13.90, and Kohl’s Corp., 7.2 percent to $30.69.

Losing ground on the vendor side was Liz Claiborne Inc., down 11.8 percent to $5.70 after reporting third-quarter losses Monday.

European and Asian stocks were also down in Tuesday trading. France’s CAC 40 lost 4.8 percent to land at 3,336.41 and London’s FTSE 100 shed 3.6 percent to end the day at 4,246.69. LVMH Moët Hennessy Louis Vuitton was down 11.3 percent in Paris, while Switzerland’s Swatch Group and Compagnie Financière Richemont declined 10.1 percent and 9.7 percent, respectively.

With fears of global recession drowning out earlier optimism about the Chinese bailout plan, Hong Kong’s Hang Seng Index was off 4.8 percent to 14,040.90 while, in Tokyo, the Nikkei 225 lost 3 percent to close at 8,809.30.