centro extension granted, page-5

Centro Wins Extension From Banks to Repay A$3.9 Billion in Debt

By Laura Cochrane

Feb. 15 (Bloomberg) -- Centro Properties Group, the Australian owner of more than 700 U.S. malls, persuaded banks to give the company an extra two months to refinance A$3.9 billion ($3.5 billion) of debt while it works to sell assets.

Creditors including National Australia Bank Ltd. and Commonwealth Bank of Australia, the nation's biggest, extended the deadline to April 30, Melbourne-based Centro said today in a statement to the Australian Stock exchange. The deadline on loan facilities associated with a U.S. venture has been extended to Sept. 30. The debt was due today.

``The group appreciates the cooperation of its lenders which will allow sufficient time to complete the review of recapitalization options,'' Chief Executive Officer Glenn Rufrano, 58, said today in a statement. ``The strategic review is progressing well with a significant number of parties interested in pursuing a recapitalization of the group.''

Centro shares have plunged 89 percent after the company said Dec. 17 it was struggling to refinance debt, wiping more than A$4 billion from its market value. The company's decline demonstrates how credit market losses are playing out across the globe. Banks and securities firms have written down more than $146 billion of assets amid falling U.S. home prices, while shopping mall vacancy rates in the world's largest economy rose in the fourth quarter.

The company borrowed under former Chief Executive Officer Andrew Scott to buy $9 billion of malls over two years, transforming the owner of Australian regional retail centers into an international mall operator. Scott quit Jan. 15 and was replaced by Rufrano, the head of the company's U.S. business.

Asset Sales

Centro has been in talks for at least two months with lenders that also include Australia & New Zealand Banking Group Ltd., JPMorgan Chase & Co., Royal Bank of Scotland Group Plc and BNP Paribas.

Centro has been trying to sell stakes in two of its unlisted funds, one in Australia and one in the U.S., to pay down debt. The larger fund, Centro Australia Wholesale Fund, has A$2.6 billion of assets and investments in 28 malls in Australia and New Zealand, according to a Dec. 17 company release. Centro holds a 50 percent stake in the fund, with the remainder owned by Centro's Direct Property Fund, also half owned by the parent.

The Centro America Fund has A$1.1 billion in assets and investments in 32 U.S. shopping centers. Centro owns 41 percent of the fund.

Rufrano is seeking to persuade investors and creditors to let Centro retain a A$26.6 billion collection of malls that stretches from Perth, Western Australia to Yonkers, New York.

Some 65 percent of the company's assets are in the U.S., including malls gained when Centro paid $5.2 billion in cash and assumed debt for New Plan Excel Realty Trust, the biggest U.S. acquisition by an Australian-based real estate investment trust. Rufrano was CEO of New Plan at the time of the sale.

U.S. Expansion

Scott's expansion into the U.S., based on a strategy of using short-term borrowing to fund long-term investments, collapsed last year as the fallout from the U.S. subprime mortgage market drove up borrowing costs.

The credit crunch also shut off Centro from the commercial mortgage-backed securities market the company had relied on for much of its financing needs.

Buying New Plan added properties such as the 1.1-million- square-foot Independence Mall in Wilmington, North Carolina, and Grants Mill Station, a 227,000-square-foot center in Irondale, Alabama, a town of 10,000 people.

Australian Malls

Centro's eight most profitable shopping centers are in Australia, where retail sales increased for a seventh month in December, spurred by unemployment at a 33-year low in an economy enjoying its 17th straight year of growth.

Rufrano may have to rely on cash flow from malls including Centro Galleria in Perth and Centro Bankstown in Sydney to keep the company afloat until he can sell assets.

Scott had spun off the malls Centro bought into 34 property syndicates, three wholesale funds, two unlisted property funds and one listed property fund. Investors pooled money into those funds, allowing Centro to earn fees for managing the assets.

Centro Properties and three of its units have cut or suspended dividends as the company struggles to pay debts.

To contact the reporter on this story: Laura Cochrane in Melbourne at lcochrane3bloomberg.net