Blackstone to Invest $500 Million in General Growth as SEC Opens Probe

Aug. 17 (Bloomberg) -- Blackstone Group LP, the world’s largest buyout firm, agreed to invest $500 million in General Growth Properties Inc. as part of its bankruptcy plan, as the U.S. Securities and Exchange Commission opened a formal insider- trading probe of some of the mall owner’s officials.

Blackstone reached the deal with the investor group financing the plan, General Growth said today in a revised reorganization proposal in U.S. Bankruptcy Court in New York. General Growth also said it received notice in July that the SEC is investigating possible insider-trading violations by current and former officers and directors.

General Growth, the second-largest U.S. mall owner, is scheduled to seek court permission this week to send the plan to creditors for a vote. New York-based Blackstone would get new common stock and shares in a new company that General Growth will spin off when it exits bankruptcy.

General Growth said the SEC investigation “is the continuation of an informal inquiry” started by the agency in October 2008. SEC spokesman John Heine declined to comment.

“General Growth intends to continue to cooperate fully with the SEC with respect to the investigation,” the company said in court documents.

General Growth, based in Chicago, described Blackstone’s participation as a “potential” investment in an earlier version of the plan. In the new version, General Growth also agreed to issue new notes to replace certain so-called Rouse notes. The company previously planned to reinstate $1.35 billion worth of the debt.

David Keating, a General Growth spokesman, couldn’t immediately comment on the terms of the new notes.

The case is In re General Growth Properties Inc., 09-11977, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporter on this story: David McLaughlin in New York at dmclaughlin9@bloomberg.net;

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