cnp: a month away from possible bankruptcy

Centro teeters on edge of collapse

Carolyn Cummins
August 26, 2008

CENTRO Properties Group is only a month away from possible bankruptcy as it struggles with its sixth attempt to convince its global banking syndicate to throw it another lifeline to repay a mountain of debt.

Yesterday the business, which owns and manages more than 1500 shopping centres from Roselands in NSW to the Midwest of the United States, was said to be on the edge of going under - with directors admitting they were struggling to raise cash, either from a proposed hybrid/debt issue, or asset sales, before the crucial September 30 bank deadline.

Investors were stunned at yesterday's early news that, despite months of negotiations and five debt reprieves, the group was back at square one - owing more than $4 billion and only weeks from the next deadline.

The shares were slashed by as much as 3.5c, or 16 per cent, before closing over 9 per cent lower at 20c. This was a far cry from the highs of over $10 at which Centro traded in March last year - a market value of about $8.6 billion compared with a mere $169 million now.

Centro's chief executive, Glenn Rufrano, said: "Discussions with the lenders on possible terms are at a preliminary stage and no specific proposal has been formulated. The group can give no assurance that any further debt extensions will be achieved beyond the expiry of the current extensions on September 30."

Centro's spokesman said more details would be provided on Friday when it releases its annual results. Mr Rufrano has already said he was suspending dividend payments and last week the group's US joint venture vehicle, Centro NP LLC, declared a loss of $US299 million ($342 million) for the three months to June 30.

Mr Rufrano has undertaken a recapitalisation program but said yesterday that "in the absence of a recapitalisation solution in the short term, the group's objective is to obtain longer-term debt extensions from the lender groups beyond December 15 to provide a more stabilised environment for the recapitalisation process."

Centro's current debt extension with its US lending group - mainly of institutional investors and pension funds - comprises an aggregate $US1.1 billion ($1.2 billion), due on September 30.

The debt extension with the Australian group - including the ANZ, Commonwealth, NAB, St George and the German West LB bank - comprises $2.3 billion and is due by December 15, the same date as $US450 million owed to US private placement noteholders falls due.

Only two weeks ago the ANZ and CBA said they were keeping a watching brief on troubled loans including Centro and would look at bad debt provisions.

But while it was understood that the bankers had seen, and presumably signed off, on Centro's announcement yesterday, analysts were concerned at just how long the syndicate would stay together and support Mr Rufrano.

Since the last bank extension at the end of May, Centro has raised $US714 million through the sale of 29 of 31 assets in the Centro America Wholesale Fund. But that deal was done with Centro remaining as the manager of the shopping centres.

Remaining the manager of the assets means Centro can earn lucrative management fees.

So far Centro has not broken any bank covenants


http://business.smh.com.au/business/centro-teeters-on-edge-of-collapse-20080825-4230.html