Hedge fund Farallon Partners offered to recapitalize troubled mall owner Mills Corp. ( MLS) with $499 million of new equity.

Farallon, in a letter to the investment bankers advising Mills, said the company had requested the recapitalization proposal.

The San Francisco-based hedge fund already is the company's largest shareholder, with an 11% stake. Mills currently is in the process of restating its past financial results, while also exploring a sale of the company.

Farallon said the current sales process is being hindered by Mills' weakening liquidity position.

"Any sale today would almost certainly be at a discount in order to compensate the buyer for abnormal conditions and the additional risks taken on to buy a company under litigation and without current financial statements," Farallon said in its letter, which was published in a Securities and Exchange Commission filing Tuesday morning.

Farallon says that the equity infusion, along with the addressing of numerous shareholder lawsuits, will allow the company to run a "more typical sales process in the future and garner a higher valuation."

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