Simon Explores a General Growth Deal

[Josh4580]

http://online.wsj.com/article/SB10001424052748704538404574541923917766450.html

 

Ackman is up 600% on the GGWPQ equity as of now, which equates to a ~$400 million gain.  Not bad at all.  

 

I think the current price of the equity is a base price going forward, with upside near the $20-$25 range.  

 

Any thoughts?

[brker_guy]

I thought Ackman bought the notes of General Growth, not the equity? 

[Josh4580]

He bought 25% of the equity at an average price of 83 cents.

[brker_guy]

Ok, thanks.  According to Yahoo, he only holds 23mil shares as of Sept. 30th.

 

http://biz.yahoo.com/t/29/630.html

 

Don't see how that equates to $400MIL in gain from equity.

[Josh4580]

Thats because most of his holdings are in the form of total return swaps with banks. 

[brker_guy]

I am confused.  May be someone on this board can enlighten us with the meaning of "total return swaps with banks".

 

I always thought that if you hold equities in a company, you have to report the total position with the SEC if it's 5% or more.  So far, I can only trace 23mil shares.  Not sure how that ever equates to $400MIL in gain...  That's okay.  If a pumper is here to pump, I just thought he needs to get his facts straight....

[Josh4580]

http://www.reuters.com/article/pressReleasesMolt/idUSTRE54R4O020090528

 

Ackman, whose hedge fund Pershing Square Capital Management LP owns about 25 percent of the Chicago-based mall operator, believes extending most of the company's $27.3 billion in debt for seven years would be enough to resolve its problems.

 

"What we propose is GGP simply extends the maturity of its debt for seven years. We think if they extend their debt for seven years, everyone comes out whole. There's no fire sale liquidation, the equity remains intact," he said.

 

In his letter he stated his average price was 83 cents per share. 

 

http://en.wikipedia.org/wiki/Total_return_swap

 

The TRORS allows one party to derive the economic benefit of owning an asset without putting that asset on its balance sheet, and allows the other (which does retain that asset on its balance sheet) to buy protection against loss in its value.

[Josh4580]

http://www.reuters.com/article/marketsNews/idCNN1916836620091119?rpc=44

 

The company reached a deal with representatives of 70 loans -- ranging in size from tens of millions to more than $1 billion -- for extensions averaging six years, it said.

 

Ackman thought it would be 7 years, I guess he was off by only one year.  Not a bad estimate. 

 

[brker_guy]

Josh, thanks for the link on the total return swaps (TRS).  I read through the description, but don't see how that TRS = Equities there.  Needless to say, that is a bet for Ackman.  After his performance at the Target annual meeting which left him in tears and crying to the press, this is somewhat of a redemption for him...