From SHM Centro pummelled as dollar's dive inflates debt...

From SHM

Centro pummelled as dollar's dive inflates debt costs

Centro Properties Group, the shopping mall owner seeking a debt extension to stay in business, fell 4.2%, pushing its market value below $100 million, as a weakening Australian currency increases repayment costs.

Shares in Centro, the owner of shopping malls stretching from Sydney to New York, fell 0.5 cents to 11.5 Australian cents in Sydney on the Australian stock exchange, heading for a record low. The company's market value has plunged to $97.2 million, after peaking at $8.5 billion in May 2007.

The Australian dollar has slumped 18% against the US currency since reaching a 25-year high in July, limiting the appeal to Centro of selling Australian assets to help pay down debt, the bulk of which is US-dollar denominated. Centro shares have tumbled 99% since reaching a record $10.06, as the company seeks its sixth debt reprieve in 12 months.

``The position is getting bleaker and bleaker,'' said Winston Sammut, who oversees the equivalent of about $50 million at Maxim Asset Management in Sydney. ``The lower Australian dollar has limited their options. They're effectively unhedged as far as currency movements are concerned.''

Centro Retail Group, a unit of Centro Properties, dropped 5.4% to 17.5 cents, valuing it at $400 million.

Centro Properties, whose US malls generated about 57% of revenue last year, borrowed in US dollars for about 73% of its total group debt of $17.4 billion, according to its full-year earnings reports published Aug. 29.

Centro's Chief Executive Officer, Glenn Rufrano, is trying to sell assets and raise cash to help repay as much as $6.6 billion of debt. The company said last month it may offer lenders securities convertible into shares to reduce borrowings, diluting existing holdings.

The weaker Australian dollar has added to concern that Centro will struggle to find buyers for its assets, according to Sammut. Centro on Sept. 4 said it had canceled the sale of a Sydney shopping center after failing to find a purchaser before the August deadline.