Centro bondholders organize; refinancing deadline extension likely - sources By Hema Oza and Matt Wirz in New York
Published: January 29 2008 13:54 | Last updated: January 29 2008 13:54
This article is provided to FT.com readers by Debtwire—the most informed news service available for financial professionals in fixed income markets across the world. www.debtwire.com
Centro Properties will be hard pressed to resolve its liquidity crunch before its interim financing expires on 15 February and will likely secure extensions from its lenders to allow for the delay, three sources close to the situation told Debtwire.
The Australian and US shopping mall owner failed to refinance AUD 3.9bn of short-term debt back in December. However, it could take several more months for newly appointed CEO Glenn Rufrano to negotiate long-term financing.
Those talks currently involve the five large banks that have lent to Centro’s US entities - JPMorgan, Bank of America, Wachovia, RBS and Key Bank - as well as Australian bank lenders and owners of private placement bonds issued by the Australian parent companies, the sources said. The US credit facilities include a USD 1.5bn term loan arranged by JPMorgan and held by all five banks and a USD 350m revolver that was not syndicated. Law firms representing the US banks include Cadwalader, Wickersham & Taft, Paul Hastings and White & Case, the sources said.
As Rufrano deals with bank lenders, the company’s assorted bondholders are also organizing. The CEO stated in a press meeting Thursday that he will meet with bondholders next week.
The company issued three types of different paper to US investors: public REIT bonds associated with the company’s New Plan Excel Realty Trust as well as USD 450m of private placements notes and approximately the same amount of convertible bonds issued by the Australian entities. Owners of the private placement notes engaged Bracewell & Giulliani as legal counsel while the REIT bond holders hired Bingham McCutchen, said two of the sources close to the situation.
The private placement holders last week entered a standstill agreement with Centro until 15 February concerning an alleged event of default under their indenture, as previously reported. That purported default stems from the company’s failure to disclose its guarantee of USD 1.4bn in off-balance sheet loans in 2007 when it issued one piece of the private placement bonds and amended a pre-existing tranche sold in 2005, according to one of the sources familiar.
Neither the REIT bonds, nor the convertible notes benefit from covenants that would trigger an event of default because of the omitted disclosure, said the source. The private placement owners and convertible bond holders did not form a joint committee because of their different covenant packages and placement within Centro’s capital structure, he added.
For now, bondholders are feeling out their ability to work with Centro’s bank lenders to determine use of proceeds from potential asset sales and refinancings, the source said. ”At the end of the day, [cooperation] would be best for everybody,” he said.
For now the private investors have decided to allow Centro to first work through its bank loans before deciding what to do, said one of the sources close to the situation.
”We don’t know nearly enough to act yet,” a buysider said. ”So much is unknown, [including] the value of the assets and how they’re going to handle the situation.” Australian news reports in recent days stated that Centro is close to selling its Centro Australian Wholesale fund for close to USD 2bn and that Colonial First State Properties, Macquarie Group and AMP are potential buyers.
However, as previously reported, Centro Properties’ convertible bond prices surged yesterday in response to Rufrano’s announcement that Centro would not consider selling individual assets at this time.
Nomura was indicating a bid offer of 33.95-43.95 for the CBs and Lehman Brothers was showing 30-40.
CNP Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
