The Work

January 5, 2009 12:24 PM

Sidley Austin Sacked, Weil Gotshal Tapped for Gen Growth Restructuring

Posted by Brian Baxter

A little more than a month after being retained as restructuring and bankruptcy counsel by General Growth Properties, Sidley Austin has been dropped in favor of Weil, Gotshal & Manges and Kirkland & Ellis, reports The Wall Street Journal, citing sources familiar with the matter.

General Growth, a Chicago-based real estate investment trust (REIT), is the second-largest owner of shopping malls in the U.S. While General Growth has not yet filed for Chapter 11 protection, the retail real estate giant is struggling to restructure or postpone payments on over $20 billion in debt, installments of which are soon coming due.

The Am Law Daily reported in November that James Conlan and Larry Nyhan, cochairs of Sidley's corporate reorganization and bankruptcy group, were advising General Growth. Last month a syndicate of lenders granted General Growth an extension to February on payments due on a $900 million loan for two Las Vegas malls.

Now the firm has been dropped in favor of Weil and K&E. (Neither Conlan nor Nyhan immediately responded to requests for comment.)

The Journal reports that K&E bankruptcy big shot James Sprayregen--who recently returned to the firm after a three-year stint at Goldman Sachs--has a long-standing working relationship with General Growth. Perhaps not coincidentally, Goldman Sachs also is serving as an adviser to General Growth.

K&E is being retained as bankruptcy counsel for some General Growth subsidiaries because the firm has a conflict that prevents it from advising the entire entity. General Growth operates roughly 250 shopping malls in 44 states--housing tenants like J.C. Penney, Old Navy, and Sears--with most being treated as separate projects.

As a result, Weil has been retained by the parent company. Marcia Goldstein, the chair of the firm's business, finance, and restructuring department, is advising General Growth along with restructuring partner Gary Holtzer.

While the reasons for Sidley's replacement remain somewhat unclear at the time of this post, General Growth will be getting a significant upgrade in manpower by retaining two firms noted for their significant bankruptcy and restructuring practices.

General Growth has stated publicly that if it cannot sell some of its retail assets or win extensions on payments to lenders, it may have to file for bankruptcy.

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