The hedge fund Farallon Capital Management, which owns 11% of shares in The Mills Corp., proposed pumping $499 million into the mall developer to help ease the company's heavy debt and avoid putting it up for sale at a depressed price.
The hedge fund said in a Securities and Exchange Commission filing that the recapitalization would buy Mills time to "move from a triage mode into a recovery mode." Farallon said Mills requested the proposal.
The hedge fund offered to buy Mills shares at $20 and set a Friday deadline for the two sides to agree on the proposal. The extra money would give Mills a cash infusion to cover some of its debt, which Mills warned last week could drive it into bankruptcy.
Hegde fund Farallon also said it could keep Mills from having to sell itself out of desperation to cover its debts. "Any sale today would almost certainly be at a discount in order to compensate the buyer for abnormal conditions," Farallon wrote in a letter accompanying the SEC filing.
Those abnormal conditions include widespread accounting problems that have forced Mills to delay several SEC filings and restate earnings dating to 2001. Mills said last week that an internal review uncovered extensive accounting errors, some the result of possible wrongdoing by company officials.
The company also warned that it is struggling to repay the $1 billion remaining on a loan it took out from Goldman Sachs Mortgage Co. last year to help it stay afloat. That loan is due at the end of March.
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