With just hours to spare before vaporizing, Bill Ackman’s scary “bad news” bet paid off more than double – proof that even in a collapsing economy, smart money can stay smart.
Ackman gambled that all-but-bankrupt shopping-mall giant General Growth Properties could somehow refinance $900 million in debt by yesterday’s deadline and escape bankruptcy.
Although the developer’s shares had collapsed to just 24 cents each, and its more than 200 shopping malls, including South Street Seaport and Staten Island Mall locally, were bleeding in the recession, Ackman’s long-shot paid off handsomely.
The company, the nation’s second-largest mall operator, said early yesterday prior to its do-or-die deadline that it struck a deal to refinance $814 million in mortgage debt, and retired a $58 million bond to stave off planned bankruptcy.
The shares shot up 25 percent to $1.80.
Ackman had piled up an ante of 25.6 percent of the company in the past three weeks, including debt swaps – paying the equivalent of 71 cents a share – to reap a gain of more than 250 percent yesterday.
Citigroup and Morgan Stanley – armed with their federal rescue billions – also bought in at similar fire-sale prices for stakes of 5.4 percent and 5.1 percent, respectively.
All hasn’t been rosy, however, for Ackman and his hedge fund, Pershing Square Capital.
He’s met some snags in his gamble on retail chain Target Corp. to spin off the land under its stores into a separate trust.
Ackman, 42, said three weeks ago he’s putting his Target plans on hold until next year when the economy might be more stable.
Ackman holds 9.6 percent of Target, paying an average price of about $54 per share. Target shares closed yesterday at $35.84, off $1.71.
General Growth, a real estate investment trust, got into its cash crunch over an $11.2 billion all-debt acquisition of Rouse Co. in 2004.
To help its restructuring, the firm plans to sell its Las Vegas retail operations.