Simon Property Group Inc is weighing a higher bid for General Growth Properties Inc after the No. 2 U.S. mall owner came up with a rival plan to emerge from bankruptcy as a standalone company, two sources familiar with the matter said on Tuesday.

Simon, whose roughly $10 billion offer was spurned by the smaller rival, is working on a $6 billion credit line from JPMorgan Chase & Co , which would add to the cash it already has available, the sources said.

Simon, the largest U.S. mall owner, could also partner with Blackstone Group LP and sovereign wealth funds on a bid, although one source said a partnership with the private equity group may or may not materialize.

The development comes about a week after William Ackman's Pershing Square Capital Management and fund manager Fairholme Capital Management pledged $3.93 billion to shore up General Growth's own reorganization proposal backed by Brookfield Asset Management .

The new capital commitment took away a key edge that Simon's rebuffed offer had, as General Growth's unsecured creditors are now being offered cash under both the proposals.

Simon is also moving ahead of an April 13 bankruptcy court deadline to make the General Growth proposal a court-approved bid. A competing bid then would become costlier because General Growth's plan includes issuing 120 million warrants, worth hundreds of millions of dollars, to its backers.

Simon declined to comment. Both sources declined to be identified because the talks are not public.

Simon has urged General Growth to not give out these warrants, which it sees as deal protections, one source said.

The two sides have been in touch with each other over a bid. Chief executives David Simon and Adam Metz, of General Growth, have spoken a couple of times, while Simon CFO Stephen Sterrett met on Monday with General Growth representatives, the second source said. Simon and General Growth have also been corresponding through their attorneys, the source said.

General Growth also sent a letter to Simon asking for more details on how it would fund a deal and if Simon would offer stock to General Growth's equity owners, the sources said.

In its response, Simon has indicated to General Growth that it would be open to the bankrupt company doing due diligence on Simon to help it evaluate Simon's equity, the first source said.

Simon also plans to structure a new takeover offer in a way that allows for an apples-to-apples comparison with General Growth's reorganization plan, the source said.

The General Growth plan calls for splitting the company into two. One company would hold General Growth's highly valued malls, while the other, called General Growth Opportunities, would hold mostly non-income-producing development property and underperforming shopping centers.

Simon plans to go with a similar structure in a revised offer, which it hopes would allow for a debate on the rest of the issues, the first source said.

Simon had initially structured its offer so that it would give equity holders about $6 per share and spin off General Growth's residential real estate business to the shareholders. Simon valued that business at about $3 per share.

Our goal is to maximize value for all stakeholders and we have developed a sound process to enable us to achieve that goal, a General Growth spokesman said in an e-mailed statement on Tuesday evening. The company declined to elaborate further.

Shares of General Growth were at $15.27 in after-hours activity, up 1.1 percent from their close of $15.10 on the New York Stock Exchange. Simon shares were at $84.08, down 0.1 percent from their close of $84.18.

The case is In re: General Growth Properties Inc, U.S. Bankruptcy Court, Southern District of New York, No. 08-13555

(Editing by Phil Berlowitz and Muralikumar Anantharaman)