centro lenders likely to extend debt bill supp, page-7

Source: The Australian Financial Review newspaper [Page 56]
Date: Monday 29 September 2008

Centro lenders likely to extend debt bill support
Mathew Dunckley

Centro Properties Group appears likely to win another extension this week as its lenders shore up their positions ahead of a do-or-die deadline in December.

An extension on $1.2 billion worth of overdue borrowings expires tomorrow and the banks involved, known as the American syndicate, are expected to be willing to provide continuing support until December.

The lenders are Bank of America, KeyBank, Royal Bank of Scotland, JP Morgan and Wachovia.

Centro chief executive Glenn Rufrano has said there was "no reason to believe that the extension will not be made".

It is understood that negotiations over Centro's fifth such extension continued throughout the weekend. "It's proceeding, it's as painful as it ever is, but everyone believes it's going to happen," said one well-placed source.

Although Centro has failed to attract a major third-party investor and made only limited progress on its asset sales program, insolvency experts have tipped there was a compelling incentive for the banks to extend their support.

In Centro's May funding extension agreement, the banks picked up some extra collateral in the shape of fixed and floating charges as well as American real estate mortgages.

For that extra collateral to hold, or "harden", under Australian law they must keep the company afloat for at least six months.

If they do not, analysts said, their position would be significantly weakened if they pulled their support and placed the company in administration.

The group's Australian lenders have signalled they are happy to maintain their support until December 15.

Centro, which has to refinance $8 billion of debt by the end of this year, hopes to negotiate a complicated debt-for-equity swap with its banks ahead of this deadline.


Ends.

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