Australia's Centro Properties Group remains under heavy pressure to sell assets or find a cornerstone investor after lenders agreed to give the US mall owner a two-month reprieve on nearly $US5 billion in debt, analysts said.
Shares in Centro jumped as much as 17 per cent on Monday on news of the debt extension but gave up most of their gains as analysts said it still faced collapse if unable to find more cash before its new April 30 deadline.
"This is a stay of execution. It's almost impossible to quantify what the equity in this business is worth," said ING Investment Management portfolio manager Justin Blaess.
Centro, one of Australia's biggest casualties of the subprime mortgage crisis, got into trouble when it borrowed heavily using short-term debt to finance long-term investments.
On Friday, lenders agreed to extend a deadline on a total of $5.4 billion ($US4.8 billion) of debt.
The company late on Friday confirmed its current liabilities are about $1.5 billion higher than previously stated, saying the portion of debt had been incorrectly classified as non-current. Centro, which owns 700 shopping malls in the United States, had flagged the reclassification last month.
Standard & Poor's said the reclassification of the $1.5 billion of debt meant that short-term debt now accounted for 72 per cent of Centro's total debt, up from 30 per cent previously.
Referring to the Centro affiliate that is rated CCC+ by Standard & Poor's, the agency said: "These announcements do not change the near-term probability that Centro NP could be put into default by its creditors, notwithstanding that the company's operating assets remain of good quality."
Centro's main local bankers are Australia and New Zealand Banking Group Ltd, Commonwealth Bank of Australia Ltd (CBA), National Australia Bank Ltd and St George Bank Ltd.
It also has US bank creditors including JP Morgan and Bank of America.
Centro NP, formerly the New Plan Excel Realty Trust, was bought by Centro last year for $US3.4 billion in an acquisition that greatly increased its debt levels.
Asset sale
Centro is conducting a review to sell off assets or the entire group, with media reports putting Blackstone and Citadel investment groups, property developer Mirvac Group and Macquarie Group Ltd among the interested parties.
Centro said it has renegotiated $2.3 billion of debt with its Australian banks, $1.4 billion associated with its US joint venture with the Centro Retail Trust, and $US450 million owed to US private noteholders. The bank debt includes the reclassified $1.5 billion of current liabilities.
In addition, its affiliate Centro Retail Trust said on Friday it had received an extension on $1.2 billion of debt.
"When you look around at the wider world, there's financial disasters happening everywhere. Credit markets are still under siege. We don't want to take financial risk in that sort of market," said Blaess, explaining why ING no longer holds Centro.
Centro shares were up 3.8 per cent at $0.63 after hitting an early peak and five-week high of $0.695, but are still down almost 90 per cent since it revealed in December it was having trouble repaying debt.
Centro Retail shares rose 2.7 per cent to $0.38.
*I just bought more this morning at .68 and remain HOLD.
CNP Price at posting:
0.0¢ Sentiment: Hold Disclosure: Held
