centro told to sell assets

Centro told to sell assets


March 24, 2008

BANKERS to the debt-ridden Centro Properties Group are pressing the shopping centre owner to speed up the sale of key assets to bring down its mountain of liabilities as the company fast approaches its debt re-financing deadline.

The Herald understands the group's lenders and bondholders met Centro's recently appointed US chief executive, Glenn Rufrano, in San Francisco at the weekend, updating them on its plans to restore financial confidence in its business.

These included finding buyers for Centro's stakes in its US and Australian unlisted funds that own significant chunks of its retail centre property portfolio and an equity injection into the main group itself.

But it is understood that the banks, which are owed almost $4 billion in short-term debt, of which at least $2 billion loaned by its Australian lenders needs refinancing before April 30, want to see a greater commitment towards more asset sales.

The secret Easter meetings were held as Mr Rufrano considers offers for Centro's share in the two wholesale funds. But institutional investors said last week they held little hope that any firm bids had been proffered to the group.

Brokers said although four parties - Mirvac, Mulpha, GE Capital and Blackstone - had expressed interest in conducting further due diligence on the business, they were not necessarily the frontrunners.

The deadline for expressions of interest in the two funds was last week.

Mr Rufrano issued a statement last Wednesday saying various data rooms were open, with companies representing local and offshore interests granted access in order for them to undertake due diligence.

"Once formal bids are received and evaluated, the board will have the necessary information to determine the optimal strategy in the best interests of all Centro shareholders," Mr Rufrano said.

Unwillingness on the part of potential buyers for Centro's holdings in the funds, of which the group intends to hang on to the management rights, and its plunging share price are said to be complicating the negotiations over the company's future.

Its securities closed last week at just 27.5c, giving it a market capitalisation of $232.4 million, a far cry from its $6.9 billion value only six months ago.

Centro is also having to re-organise its debt repayments at a time when the global credit crisis has pushed up the price of servicing new loans to stratospheric levels above the official cash rate.

The prospects for the disposal of its US shopping centre business, whose debt-backed acquisition last year helped trigger Centro's financial crisis, is being further undermined by the US economy's plunge towards recession.

The company's bankers are said to be still keen to avoid putting Centro into administration given that its complex management and financial structure will take time to unwind and even longer to produce enough cash to go around.

Nonetheless, Centro's competitors and potential buyers have all said they would prefer to buy separate assets rather than what is currently being offered.

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