centro article in afr today...

Source: The Australian Financial Review newspaper [Page 67]
Date: Friday 22 August, 2008

Split may fix Centro crisis
Mathew Dunckley

A split of Centro Properties Group's American and Australian operations is a possible solution to the company's debt-fuelled crisis, but only in the long term.

The scenario was flagged in The Australian Financial Review yesterday and while Centro made no official comment yesterday, well-placed sources confirmed it was plausible.

Centro has lived at the mercy of its banks after it was unable to repay $3.9 billion in loans due in December.

It is selling assets to reduce borrowings and restructuring to restore a sustainable footing.

As part of that process, it is considering selling assets it bought as part of the $5 billion New Plan Excel Realty Trust acquisition last year that are still largely held in a company known as Centro NP.

Centro NP is jointly owned by Centro, the listed Centro Retail Trust and unlisted Centro Diversified Property Fund International.

"At some point in the future one of the solutions, or part of the solution, might be a new equity in New Plan," one insider said. "It is certainly one of the possibilities."

The source said it was likely that any buyer for the New Plan assets would come from America due to the costs of capital and that would lead to a severing of ties with Australia.

The news comes before a big week for Centro, beginning on Monday with a directions hearing for a shareholder class action and ending with full-year results presentations.

In a note to investors, JP Morgan predicted net profit after tax of $169 million for Centro.

"Gearing is the dominant issue, and as asset values deteriorate in the US, leverage is likely to have pushed higher [for Centro] from last reported 82 per cent gearing ex-intangibles," it said.

"We think it's highly unlikely to sell enough assets to address the full debt load ... its fate looks still well and truly in the laps of its lenders."


Ends.

Cheers, Pie :)