The document provides background information on the Edward J. DeBartolo Corporation (EJDC), a large real estate and shopping mall developer, and its debt restructuring efforts in the late 1980s and early 1990s. It describes EJDC's expansion into retail acquisitions that were financed through large amounts of debt, leading to cash flow issues. It also summarizes Citibank's review of its exposure to EJDC and the bank's efforts to optimize its position through additional collateral or restructuring EJDC's debts before it eventually defaulted on interest payments.

1. The Edward J. DeBartolo Corporation Debt Restructuring Eric P Stoclet

2. Background Founded in 1944 by Edward J. DeBartolo Boardman Plaza, company’s first major shopping centre built in 1951 By 1965 owned over 100 community centers nationwide Noting a population surge in Florida, sold most of the community center portfolio in the 60s to invest in land in Florida 1976 DeBartolo opens Randall Park Mall, at 2.2 million sqft the largest mall in the world at the time By the end of the 80s Mr. D, as he was known, owns 26 malls in Florida and 59 malls in total with a footfall of 40 million customers per annum. In 1989, DeBartolo is the largest shopping center developer in the US owning or managing 10% of total mall retail space Also owns varied sports interests including the San Francisco 49ers NFL football team, the Pittsburgh Penguins NHL ice hockey team, and a number of prime racetracks Well-managed business with good cash flow and outstanding asset values Friday, September 11, 2009

3. Retail and Real Estate: Synergies? 1980s DeBartolo decides to move into retail based on “vertical integration” concept In 1986, in partnership with Dillard Department Stores, a major department store chain in the mid-west and south of the US, acquires Higbees Co. a small mid-west department store chain 1986 DeBartolo teams up with well-known “corporate raider” Paul Bilzerian to thwart Campeau Corp.’s bid for Allied Department Stores with 24 divisions including such coveted retail assets as Ann Taylor and Brooks Brothers Friday, September 11, 2009 NEW OFFER ACCEPTED BY ALLIED By TAMAR LEWIN (The New York Times) October 8, 1986, Wednesday In an effort to stave off a $66-a-share bid by the Campeau Corporation, the board of the Allied Stores Corporation yesterday approved a $67-a-share merger offer from Edward J. DeBartolo Sr. and Paul A. Bilzerian.

4. Allied Department Stores – Acquisition by Campeau Friday, September 11, 2009 CANADIAN WINS ALLIED RETAILERS FOR $3.6 BILLION By ISADORE BARMASH (The New York Times) November 3, 1986, Monday Ending a tumultuous struggle to remain independent, (…), agreed yesterday to be acquired by a Canadian concern. ALLIED STORES RECEIVES $2.4 BILLION CANADIAN BID By ISADORE BARMASH (The New York Times) September 5, 1986, Friday The Campeau Corporation, a Canadian real estate developer, offered yesterday to buy the Allied Stores Corporation, one of the largest American retailers, which owns such well-known stores as Bonwit Teller, Brooks Brothers, Ann Taylor, Jordan Marsh and Garfinckel's, among others. Campeau offered $58 a share, or $2.47 billion

5. Allied Department Stores – Acquisition Financing Fully debt financed. Campeau’s equity in the transaction was $50 million or 1.2%! DeBartolo lends Campeau $150 million or 43% of equity piece Well-secured, options on 35% of Allied for additional $60 million payment Friday, September 11, 2009

6. Allied Department Stores – Acquisition Financing Allied results for first nine months of 1987: Operating earnings: $44 million FCF: $100 million (reduced capital spending) Interest paid: $244 million Friday, September 11, 2009 COMPANY NEWS; Campeau to Repay Loan to DeBartolo The New York Times: Wednesday, August 19, 1987 The Campeau Corporation said that it had agreed to repay a $150 million loan to the Edward J. DeBartolo Corporation and that DeBartolo has canceled an option to acquire 35 percent of Campeau's Allied Stores subsidiary.

7. Federated Department Stores – Acquisition by Campeau Campeau launches $47 a share or total $4.2 billion bid for Federated Friday, September 11, 2009

8. Federated Department Stores – Acquisition by Campeau Campeau wins Federated battle April 1 st 1988, paying $73.50 a share or a total of $6.4 billion Friday, September 11, 2009

9. Federated Department Stores – Acquisition Financing Fully debt financed with exception of proceeds from sale of Brook’s Brothers (less than 3% of acquisition cost) DeBartolo loan financed through mortgage backed syndicated bank loan led by Citibank Friday, September 11, 2009

10. Federated Department Stores - Bankruptcy Friday, September 11, 2009 What Chapter 11 Means for Campeau 15 January 1990 The Associated Press Campeau Corp.'s decision to seek Chapter 11 bankruptcy protection from creditors for its two U.S. retailing subsidiaries on Monday means the debt-swamped businesses can operate, and many consumers may never notice a change. None of the 258 stores operated by Federated Department Stores Inc. and Allied Stores Corp. is expected to close although some may be sold as part of any future restructuring, which will have to be approved by a bankruptcy judge. Under Chapter 11 of the Federal Bankruptcy Act, companies are shielded from creditors while they remain in business and attempt to reorganize their finances so all debts eventually can be repaid. Many companies emerge from Chapter 11 as smaller but financially sound businesses. In Campeau's case, the Chapter 11 filing's immediate result would be to keep stores open and supplied. Many businesses had been reluctant to continue shipping merchandise to Campeau stores because they weren't sure they'd be paid, but the filing will establish a timetable for payment that could help reassure these suppliers. It was unclear how the filing may affect Campeau's 110,000 employees in the United States, some of whom presumably could be laid off in any bankruptcy restructuring. Immediately, however, the company's stores have indicated that employees would continue to receive pay and benefits and business would continue as usual. Uncertainty over whether Campeau would be able to repay the $8 billion in debts it has acquired through takeovers of Federated and Allied was the main reason the parent company sought bankruptcy court refuge for its U.S. units.

11. Federated Department Stores - Bankruptcy Friday, September 11, 2009 Campeau Loan Risk Said Low For DeBartolo Mary Jo Nelson 23 January 1990 The Daily Oklahoman Ohio developer Edward J. DeBartolo's $480 million loan to Canadian Robert Campeau is well secured and DeBartolo probably has no serious financial exposure because of problems related to Campeau's $6.6 billion takeover of Federated Department Stores Inc., business authorities said Monday. (…) the loan is backed by the Ralph's Grocery store chain in California, which is believed to be worth more than $480 million. (…)

12. The EJDC – What next? Based on 12/31/88 financials, Citibank’s relationship manager put these projected figures together: Friday, September 11, 2009 All figures relating to EJDC are simplified. Actual figures were in all likelihood quite different. As a privately owned company , EJDC did not provide publically available financial statements

13. Health check the borrower: CF projection: can borrower meet its obligations? Company valuation: how real is the equity? Is the borrower aware or in denial?  Need to understand situation of the borrower Full review of exposure: Secured? Unsecured? Nature of collateral: under-secured? Maturities vs. maturity schedule of other lenders Seniority of debt structure vs. other lenders What is most likely/worst case hair cut?  Need to know position in the creditor pool Full legal review: How solid is my loan documentation? How strong are covenants? Events of default? Repeating Reps and Warranties? Review other creditors documents (bond indentures,…) where possible  Need to know rights and obligations inside out The EJDC – Exposure Evaluation Friday, September 11, 2009

14. Strong asset value, even on a stressed basis CF insufficient to cover: Interest payments for the whole year Maturing debt, though this was not a 1990 issue Direct Citibank exposure: +/- $400 million Under-secured but with possibility to trigger additional collateral Fraudulent conveyance issues Credit policy issues: race track Value of additional collateral: state licensing,… Also had exposure in a Citibank led syndicated facility which was later pre-paid by the unsecured bank group to access excess collateral values All other banks had substantial unsecured exposures Insurance company debt (over ½ total debt) well-secured and long term Debt maturities relatively short though some unsecured creditors had shorter maturities Loan documents lacked truly enforceable covenants/defaults Financial covenants based on year-end financials MAC default (unusual): value in court is unclear, but threat allowed Citibank to stay at the table The EJDC – Exposure Evaluation Friday, September 11, 2009

15. Action Plan: Have other lenders realized there is a problem? Should I call a default? Can I get additional collateral (fraudulent conveyance issues)? Can I get repaid? Can I find another lender to take me out: “greater fool theory”?  Take all you can while you can Added race track as collateral Offered additional financing in exchange for collateral – no go Secondary market not deep enough at the time to quietly trade down and Citibank’s view was no losses likely anyway Prevent EJDC from granting additional collateral to other bank creditors with threat of MAC default Security Pacific Bank was last lender in, giving DeBartolo a small unsecured facility end of August. In October, EJDC defaults on its interest payments The EJDC – Action Plan Pre-Default Friday, September 11, 2009

16. Action Plan: Optimize sharing of available collateral Tailor restructured debt to borrower’s cash flows “ We are all equal but some of us are more equal than others” Avoid bankruptcy if possible; evaluate likely outcome in bankruptcy vs. outcome of restructuring outside of Chapter 11 Citibank position: Original loans may have had longer maturities but with MAC default are now “due and payable” Will not accept other lenders securing their exposure with EJDC assets if Citibank does not get additional collateral even though Citibank considered by other lenders as adequately collateralized Equal sharing of required prepayments through asset sales Equal economics Other banks’ position: Citibank is adequately secured Citibank’s loans were long-term and should be kept outside of the restructure Should banks agree to let Citibank have additional collateral, mandatory prepayments should go to less well secured banks first Economics should be less for Citibank given better security The EJDC – Action Plan Post-Default Friday, September 11, 2009

17. The EJDC – Restructuring Outcome Restructuring closed in late 1992 Massive legal documentation +/- $2 billion of bank debt restructured, certain insurance company loans which came due over the period were also restructured Citibank received additional collateral valued at $150 million in the form of first and second mortgages on shopping centers “ Unsecured” bank group received additional collateral valued at $1 billion+ mostly in the form of second mortgages on property and pledges of sports franchises Citibank granted “no rights until repaid” junior liens on its collateral to the bank group Banks extended all facilities for 5 years Mandatory prepayments through sale of certain assets (Pittsburgh Penguins,…) Restrictions on indebtedness, capex, investments until full repayment Economics L + 3.5%, 1% restructuring fee Friday, September 11, 2009

18. The EJDC – Closure Friday, September 11, 2009 Developer DeBartolo Is Going Public By JEANNE B. PINDER 16 September 1993 The shopping center empire of Edward J. DeBartolo, one of the nation's biggest, will join the rush of real estate owners turning to Wall Street for money by becoming a real estate investment trust with a $600 million public offering. The deal, announced yesterday, is the biggest REIT equity offering ever. With the conversion, Mr. DeBartolo's company will become yet another real estate developer to break from traditional sources of capital, like banks and insurance companies. (…) DeBartolo Realty Corporation was formed as a real estate investment trust to make an offering of 31.6 million shares of stock, with Morgan Stanley and Smith Barney Shearson as managers of the offering. (…) The REIT will own interests in 51 regional and other malls and seven other properties the DeBartolo Corporation now owns throughout the country, according to the announcement. Another 47.7 percent would be owned by the DeBartolo Corporation and its employees, with a retail partner holding the balance. (…) The DeBartolo announcement said that the money raised would be used not only to buy the DeBartolo Properties partnership interest for the REIT but also to repay some debt and refinance some at lower rates. (…)

19. The EJDC – Closure Friday, September 11, 2009 Simon Property To Acquire DeBartolo for $1.5 Billion By ADAM BRYANT Wednesday, March 27, 1996 The Simon Property Group said yesterday that it would acquire the DeBartolo Realty Corporation for nearly $1.5 billion under an agreement that would solidify Simon's position as the largest developer and operator of shopping centers in the country.

20. Restructuring – Lessons Learned Problem recognition is key: the earlier you see the problem the more time you have to deal with it. If you see it before other creditors you may be able to get out Know your hand: assess strengths and weaknesses of your position. Do your homework from scratch Legal advice is crucial, make sure you have a very good lawyer whose firm has a good bankruptcy practice To be effective in restructuring negotiations (or in any negotiation!),know the strengths, weaknesses, and goals of other parties (creditor groups, equity, …) Where you stand in the creditor group will affect what you want and what you can get: Senior secured Senior unsecured Junior… What you paid for your exposure drives your preferred outcome: Original lender (par lender) seeks maximum recovery Vulture fund/distressed debt buyer wants a fast restructure so they can (hopefully) sell at a profit Restructuring is a mix of kick-boxing and poker: you got to be good at both! Friday, September 11, 2009

21. Thank you! 27 years banking experience, 25 with Citigroup 10+ years real estate financing; $3+ billion financing of commercial and residential real estate; mortgage portfolio purchases/sales; $2+ billion buy/sell-side advisory mandates; portfolio/asset management of $2+ billion investment in German non-performing mortgage loans Workout/capital structuring skills gained restructuring exposure totaling $4+ billion during early ‘90’s US real estate crisis and 2002 Argentine crisis. Member of various creditor committees representing debt in excess of $20 billion Senior Credit Officer of Citigroup with Real Estate initial Hands-on experience in operations, financial controls, and risk management Eric Stoclet Friday, September 11, 2009