Mills Refinances Debt Amid SEC Inquiry of Mall REIT

By Ryan Chittum
From

Mills Corp. refinanced much of its debt less than a month after accepting strict terms on earlier financing, giving it until at least the end of this year to resolve its troubles, according to a securities filing.

The troubled shopping mall real-estate investment trust received $2.2 billion in financing from Goldman Sachs Mortgage Co., according to the filing Wednesday with the Securities and Exchange Commission. Goldman Sachs has been an adviser to Mills as it has sought "strategic alternatives" such as a sale of all or part of the company.

The deal would supplant one Mills announced three weeks ago with J.P. Morgan Chase & Co. and other banks that provided it cash to run its business but with strict requirements, such as selling all or part of the company by August 31.

"They were on a leash before," said Greg Andrews, an analyst with Green Street Advisors, a Newport Beach, Calif.-based real-estate research firm. "They're on a new leash, but it's still a leash."

Mills is under investigation by the SEC and has disclosed that the company is reviewing a number of areas of its accounting. The company has slashed its staff and development pipeline and said it must restate its earnings for much of this decade, but hasn't yet reported the results of the audit.

"This financing commitment is part of a series of important initiatives we have implemented in the past several months," Mills Chairman and Chief Executive Larry Siegel said in a statement. "We believe this financing commitment would provide us with greater flexibility than our existing facilities."

Mills did not return phone calls for comment.

Rich Moore, an analyst with RBC Capital Markets, said the switch to the Goldman loans could mean the company is having a hard time finding a buyer who will pay a decent price for Mills's battered shares, down more than 50% since August. "The biggest signal here is they're having trouble getting something done and they need more time," he said. "All in all it's a very negative sign for Mills."

The terms of the loans allow for extensions through the summer of 2008 if Mills meets certain conditions, including an $850 million recapitalization.

The company also said it has hired a new head of development, but didn't disclose the person's name in a statement. Mills terminated the contract of longtime development chief James F. Dausch last month as part of about 70 layoffs, many of which came in its development division.

Mills shares were down 90 cents a share to $30.99 in 4 p.m. trading on the New York Stock Exchange.

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