investor confidence, page-16

http://money.ninemsn.com.au/article.aspx?id=560441

Centro waxes and wanes as doubts grow

Initial investor enthusiasm over Centro Properties Group's debt lifeline evaporated as a shareholder class action against the distressed property fund was lodged in the Federal Court.

Compounding concerns were growing doubts among some analysts over whether Centro's lenders would reach a series of required agreements by a May 30 deadline.

Centro's share price, and that of its sister company Centro Retail Trust, took a rollercoaster ride, after opening more than 18 per cent higher after Thursday's trading halt.

Centro's stock closed 4.26 per cent, or two cents down, at 45 cents after a trading high of 56.5 cents.

Centro Retail Trust stock also traded higher before closing one cent, or 2.08 per cent, lower at 47 cents.

By contrast, in February last year Centro shares hit a high of $9.89 before it ran into trouble trying to refinance expiring dent during the global credit crunch.

On Thursday Centro announced it had negotiated a seven-month extension on $2.8 billion in debt.

But that was overshadowed later as listed litigation funder IMF Australia Ltd announced it has now filed a shareholder class action against the property fund with a claim value of at least $100 million.

"The claims relate to alleged misleading and deceptive conduct and breaches by (Centro) of its continuous disclosure obligations between 9 August 2007 and 15 February 2008," an IMF statement said.

The shareholder claim, which is being pursued by legal firm Maurice Blackman, will seek compensation over the price paid for securities, that had been inflated by the Centro's alleged failure to properly disclose its circumstances.

Last month, the maximum claim value was $100 million, IMF said, but since then "the claim value has increased materially".

Under Thursday's deal Centro's debt maturities are extended to December 15, including $2.3 billion owed to a syndicate of Australian banks and $US450 million ($A478.06 million) owed to US private placement noteholders.

Centro and some of its subsidiaries have provided security for the debt by way of fixed and floating charges and some US real estate mortgages.

To close the debt deal, a series of conditions must be met by May 30, including a requirement that Centro's creditors establish a consent process for refinancings and how proceeds from asset sales are distributed.

As well, by May 30 Centro must have finalised a $155 million "liquidity facility" to pay for capital expenditure, adviser fees and higher lender costs.

Analysts at Merrill Lynch said they were "highly sceptical" Centro's lenders could reach agreement among themselves and advised their clients to sell Centro stock.

"(Centro) is on a very short leash to say the least and at the mercy of its lenders sorting out seniority within an extremely complex structure amidst a global credit crunch with falling property prices," they said in a note to clients.

"We continue to believe that residual equity value could prove elusive."

Also tied to Thursday's announcement is another two obligations of US$1.1 billion each, owed by Centro and Centro Retail Trust on their US joint venture, which will also be pushed back to the December 15 deadline from September 30.

The rollover of that joint venture debt is also contingent on the conditions set out in Thursday's deal being inked by the May 30 deadline.

Centro's troubles became dramatically apparent last December, sending its shares tumbling 80 per cent, when it announced it was struggling with the leverage on its 800-strong property portfolio spanning Australia, New Zealand and the US.

Centro's main local bankers are ANZ Banking Group Ltd, Commonwealth Bank of Australia Ltd, National Australia Bank Ltd and St George Bank Ltd.

It also has US bank creditors including JPMorgan and Bank of America.

Commonwealth Bank has a total exposure of $1.1 billion to Centro, while ANZ's total exposure amounts to $1.2 billion and its is believed JP Morgan's exposure is $2.05 billion.

As part of its survival plan, Centro is fielding offers for two of its unlisted property portfolios, the Australia Wholesale Fund and its America Fund.