When General Growth Properties Inc. sought Chapter 11 protection last month, it took a step its biggest debt holders had believed was impossible: It took 166 of its malls into bankruptcy with it.
The surprised debt holders had believed the malls would be insulated from the parent's bankruptcy because of the way General Growth had structured the assets.
General Growth's action has rattled investors throughout the $700bn market for securities backed by commercial mortgages, or CMBS. Investors in other deals had also figured their investment was insulated from a parent company's bankruptcy.
Wall Street Journal