article in the australian today...

Source: www.theaustralian.news.com.au

Centro crisis after $345m US write-down
Maurice Dunlevy | August 21, 2008

CENTRO Properties Group has reported a $US299 million ($345 million) loss from one of its US companies for the June quarter, edging the debt-laden shopping centre owner even closer to the abyss.

Yesterday's write-down announcement, along with the disclosure that Centro is planning to sell 16 new US shopping centres for almost $US100 million, came only nine days ahead of next Friday's critical full-year group results.

News of the latest losses came in a routine US Securities and Exchange Commission filing for Centro NP LLC.

While one analyst described the $US299 million as a drop in the ocean for a group with $US6.2 billion of US assets, others said it was symptomatic of a company about to be tipped over the edge.

"Whatever Centro says, they're dead men walking," he said.

The unnamed analyst said that by itself the write-down was of no great significance.

But it was part of a bigger picture in which the banks would only allow Centro to operate as long as it paid them interest.

One of Centro's two US vehicles, Centro NP LLC, is the other half of the better known Super LLC, which is a joint venture between Centro Properties Group, Centro Retail Trust and syndicate Centro MCS 40.

The losses only emerged because Centro NP LLC holds US bonds and is required to make quarterly SEC filings.

In its statement to the Australian Securities Exchange, Centro said next week's full-year results would reflect the losses, which relate to about $115 million of property revaluations and $173.5 million of goodwill and other intangibles.

The SEC filing included an admission by Centro NP LLC that its need to restructure and extend debt obligations meant "substantial doubt" about its ability to continue as a going concern.

However, analysts said this amounted to little more than a legal disclaimer, with Centro so far able to meet all its debt obligations and not breaching any debt covenants.

The filing also revealed $US22.8 million of real estate sales in the six months to June 30, but according to documents obtained by The Australian another 16 US centres are on the sale blocks.

The properties, all community and neighbourhood centres, have an asking price of $US98 million, which according to one analyst should equate to $US90 million of sales.

The properties are spread across the US in Georgia, Indiana, Kansas, Kentucky, Louisiana, Michigan, Tennessee and Texas, and are estimated to have a 93 per cent occupancy rate, which is slightly above Centro's published figure of 91.7 per cent.

The analyst said he expected Centro's head stock, CNP, would book about a third of the sale proceeds of $30 million.

The remaining $US60 million would go to go to the Centro Retail Trust, CER.

He said he was unaware of how much debt was outstanding on a per-property basis, but expected all sale proceeds to be used to pay down existing Super LLC debt.

That, along with the strengthening US dollar, is expected to provide some comfort for Centro, which is also attempting to offload a half dozen Australian properties.

With the sale of its $75 million Southport shopping centre on the Gold Coast now expected to take longer to finalise than earlier expected, final bids closed at the end of last week for three of Centro's largest centres, the Galleria in Perth, Bankstown in Sydney's southwest and Colonnades in Adelaide's south.

Like the Southport centre, they are jointly owned by the Centro Retail Trust and Centro Wholesale Fund and are expected to sell for more than $1 billion. Brisbane's Toombul centre is also up for sale.

Toombul is ranked as CER and CWF's fourth-largest property behind Galleria, The Glen in Melbourne and Colonnades.


Ends.

Cheers, Pie :)