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Business as usual for Centro

December 19, 2007 04:34pm
Article from: AAP

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CENTRO Properties Group says it is comfortable about the ongoing viability of its business and is telling its investors that its securities are worth something after all.

Australia's second largest shopping centre owner said neither it, nor any of its managed funds, were in breach of lending covenants.

While it was looking at options to refinance short-term maturing facilities and reducing its gearing, Centro (cnp.ASX:Quote,News) was not under any obligation to sell assets.

"Centro management and external financial advisers, as well as the advisers of our financiers, closely examined the cash flows of the business,'' the company said.

"On the basis of that review, Centro is comfortable about the ongoing viability of the business and would not allow its securities to trade if this were not the case.''

Sell-off eased

Centro stapled securities gained 40c to $1.205 today.

The securities had lost more than 85 per cent of their value over Monday and Tuesday, after Centro downgraded its full-year distribution guidance and said it would not pay a first-half distribution.

Centro, which is also the fifth largest shopping centre owner in the US, has been hit by tight conditions in credit markets and was recently unable to refinance $1.3 billion of maturing debt facilities.

Asset sales an option

The company had said it might sell off some assets in US to lower its gearing, after obtaining an extension to February 15 to refinance that debt.

"In refinancing the short-term maturing facilities and ultimately reducing the gearing of the group, Centro has a number of options available to it including sale of interests in managed funds, joint venture of assets, asset sales and/or equity issuance,'' it said.

"Centro is not obliged to take any specific course of action over the next eight weeks. What is required is the development of a strategic plan or road map to successfully operate the Group on an ongoing basis.''

Centro (cnp.ASX:Quote,News) said there was no clause in any of its or Centro Retail Trust's financing documentation or loan covenants that would trigger a default if either entity's market capitalisation fell below a certain level.

"Neither Centro nor any of its managed funds are in breach of any lending covenants,'' it added.

"If asset sales are decided upon, whether in Australia or the US, Centro will look at selectively divesting assets that will allow it to repay short-term debt while at the same time preserving security holder value.''

One of its managed funds, Centro MCS 38, last week completed the sale of The Mall at Cross County in Yonkers, New York for $US78.3 million ($91.23 million), 30 per cent above book value.

Underlying business OK

Centro said its underlying business of retail property ownership and management continues to perform strongly.

"As a result, Centro has forecast distributable earnings of 40.6 cents per security, although the board has deemed it prudent not to distribute the earnings for the first half of fiscal 2008,'' it said.

"A decision on future distributions will be made as part of the strategic review. ''

Subject to refinancing occurring and the outcome of the review, the board will determine if the lack of a first half fiscal Centro Retail Trust distribution is a cancellation, a deferral or if a special distribution may be paid prior to the end of the financial year.