* GGP's stand-alone reorg plan would set benchmark

* GGP plan may make it more expensive for suitors

* Unsecured creditors may hold the key

NEW YORK, Dec 9 - The bankruptcy of General Growth Properties (GGWPQ.PK) has created a once-in-a-lifetime opportunity for suitors, but as they circle the No. 2 U.S. mall owner they are likely to find consummating a deal is not easy.

Competitors are salivating at the chance to buy some or all of General Growth's more than 200 malls, which include such marquee properties as Fashion Show in Las Vegas, Ala Moana Center in Hawaii and Faneuil Hall Marketplace in Boston. A deal could further concentrate the market in the hands of a few mall owners.

Simon Property Group Inc (SPG.N), the largest U.S. mall owner, and Brookfield Asset Management (BAMa.TO), a property investor, have approached General Growth, but a person with direct knowledge of the situation described the overtures as nothing more than informal inquiry. [ID:nN08138292]

Companies such as Westfield Group (WDC.AX), Blackstone Group LP (BX.N), Vornado Realty Trust (VNO.N), Unibail-Rodamco SA (UNBP.PA), CBL & Associates Properties Inc (CBL.N), Macerich Co (MAC.N) and Taubman Centers Inc (TCO.N) may want a piece of the action as well, according to Green Street Advisors Managing Director Jim Sullivan.

With the Chicago-based company making progress on a plan to emerge from bankruptcy intact and on its own, any buyer is likely to find it hard to muscle in. Bidders may try to buy all of General Growth in bankruptcy, or just some of its assets, but they face an uphill battle.

The stand-alone plan is going to be the benchmark by which all other proposals will be judged, said the source with direct knowledge of the matter, who did not want to be named because talks are not public. It might make it more expensive for other buyers.

General Growth, which became the biggest real estate failure in U.S. history when it filed for bankruptcy in April, has the exclusive right to come up with its own reorganization plan through late February, and experts said any suitor would likely be able to make a move only after that.

The company still has the exclusive right to file a plan so no one is doing anything right now other than strategically trying to position themselves, said Derek Smith, vice chair of law firm Paul Hastings' real estate department. Smith is not involved in the case.

UNSECURED CREDITORS KEY

A potential buyer's best hopes may lie with the unsecured creditors of General Growth. As General Growth tries to reduce its roughly $7 billion of unsecured debt, it may ask these creditors to convert their holdings to equity, which some holders may not want to do.

Simon, which has hired investment bank Lazard Ltd (LAZ.N) and law firm Wachtell Lipton Rosen & Katz, has reportedly bought unsecured debt, and a source previously told Reuters that the company had spoken to General Growth's creditors.

Brookfield has already become a meaningful creditor in General Growth, although the Canadian asset manager said it believes the interests of stakeholders would be best served if the company emerged as a stand-alone entity. [ID:nN07176985]

These moves would give the two companies a vote when General Growth files its reorganization plan. But that alone may not be enough.

If you own $1 of it, yeah, you have a vote, but your vote is worthless. So either you need to buy a bunch or make agreements with holders of the debt, Paul Hastings' Smith said.

The threat of a competing plan may actually work against any potential buyer, as it would work to keep General Growth honest in its valuation of the company and make it more expensive to come up with a better plan.

General Growth appears to have a good relationship with its creditors so far. In initial conversations at least, unsecured creditors have expressed a willingness to swap their debt for equity, the source said. That would help the company reduce debt, raise exit financing and emerge as an independent entity.

UPPER HAND

General Growth, which filed for protection from creditors when it was unable to refinance maturing debt, has also made significant progress in restructuring secured debt.

Last week, it filed a plan of reorganization to repay loans on 92 properties, resolving a large portion of its $14.9 billion of secured debt.

It plans to go to court next week to get that plan approved with the support of its unsecured creditors, the source said.

William Ackman's hedge fund, Pershing Square Capital Management, said in a recent investor letter that it felt the remaining secured creditors would also fall in line to restructure the debt on similar terms.

Pershing Square, whose Ackman is on the mall owner's board, has made a killing on its General Growth investment. The company's shares traded at $10.69 on Wednesday, while Pershing Square bought them for an average price of well below a dollar.

It said in the letter it believed an independent exit from bankruptcy will be feasible and could be achieved at high values. But it also noted the possibility of a highly competitive bankruptcy auction process.

Green Street's Sullivan put an 80 percent chance that General Growth would be sold. But others said it looks like an uphill task for a buyer.

They have already forged workout arrangements with the holders of billions of dollars of their debt on the various projects, said John Mallin, head of the real estate practice at law firm McCarter & English. Right now we'd have to say that General Growth has the upper hand. (Additional reporting by Ilaina Jonas, Dan Wilchins, Emily Chasan and John Parry; Editing by Steve Orlofsky) (For more M&A news and our DealZone blog, go to www.reuters.com/deals)