article lenders losing patience

Lenders losing patience with Centro ahead of showdown with debt-laden property group.

A CRITICAL meeting will be held in New York tomorrow to determine the future of the debt-plagued Centro Properties Group.
Group chief executive Robert Tsenin will meet some of Centro's myriad banks.

They are expected to discuss asset sales, accelerating the restructuring and the company's current financial status.

Sources said the management's relationship with its banks was breaking down with some long-term lenders -- believed to include Commonwealth Bank and National Australia Bank -- agitating for greater action to recover monies from Centro. Delivering Centro's 2010 full-year results, Mr Tsenin said there was $18.6 billion worth of shopping centres and $18.4bn of related debt across the Centro Group, including its managed funds, "with Centro's (CNP) net equity attributable to its members at 30 June 2010 being negative $2.1bn".

"This is clearly an unsustainable capital structure," Mr Tsenin said in August.

A month earlier, CNP struck deals to extend or refinance $US2.7bn of debt in its US business, but it still faces more than $10bn of maturing loans in December next year.

The banking syndicates' advisers, including insolvency firm McGrathNicol, CNP's largest single lender investment bank JPMorgan and Moelis & Co, will also be at the meeting, sources said. JPMorgan and Moelis are CNP's advisers.

Banking sources said if CNP were placed in administration the impact on listed sister trust Centro Retail Group (CER) and the Centro-managed unlisted property syndicates would be unclear.

Given that CER and the syndicates did not have negative equity and were joint investors with CNP, it presented a "corporate governance conundrum", a banking source said. One possible option, if an administrator were appointed to CNP, was for a new responsible entity to oversee the managed trusts and syndicates, the source said.

Of the original banking syndicate for Centro's Australian debt, Commonwealth Bank of Australia, National Australia Bank, ANZ and Sumitomo still had their Centro debt but Royal Bank of Scotland had sold down its position.

Any restructuring of Centro has been stymied by pending shareholder class actions, the sale of tranches of Centro debt to hedge funds and other buyers at less than 50c in the dollar, by the interlinked structure and joint property ownerships of CNP, CER and the managed property syndicates.

The property group's troubles began in December 2007, when it was unable to refinance $3.9bn worth of debt in the deteriorating credit market.