Source: The Australian Financial Review newspaper Thursday, 29 May 208
US sales to ease pressure on Centro Mathew Dunckley _______________________________________________________________
KEY POINTS
The sale will ease pressure from the syndicate of lenders.
A large pension fund is a likely buyer for the portfolio.
More assets are slated for disposal. _______________________________________________________________
Centro Properties Group appears on the verge of selling $1.2 billion worth of US shopping centres in a deal that should ease pressure from lenders, just as a new debt agreement is due for sign-off tomorrow.
Centro has been in crisis since revealing a $3.9 billion, debt-funding shortfall late last year. It has since been trying to sell assets to repay borrowings.
In January, the group put its direct stake in the 32-property Centro America Fund up for sale and, following a process run by investment bank Lazard, is now believed to be dealing exclusively with a single, interested party.
As the process has progressed, The Australian Financial Review believes Centro has moved away from selling only its 45.1 per cent stake in the fund, and is now also offering the 49.9 per cent owned by its managed funds. External investors hold the remaining 5 per cent.
The change increases substantially the likely return for Centro from any deal. It is believed the fund is about 50 per cent geared, meaning the sale could return up to $300 million to Centro from its direct holding.
Because of its co-investment model, Centro could also receive substantial proceeds from the returns to its managed funds. Centro obtained the CAF properties when it bought the Heritage Property Investment Trust in 2006.
Centro chief executive Glenn Rufrano spent much of the past week attending the International Council of Shopping Centres in Las Vegas, which sources said, could have provided a platform to finalise a deal.
At the announcement of the most recent funding extension on May 8, Mr Rufrano said a course of action on CAF would be decided within 30 days.
One analyst, who declined to be named, said a large pension fund was a likely buyer for the portfolio.
If Centro could achieve yields of about 7 per cent or lower on the CAF sale, it would be an achievement - although still at a loss to book value.
Meanwhile, further asset sales out of the Centro Australia Wholesale Fund (CAWF) are also expected soon, following a campaign managed by Jones Lang LaSalle.
Centro owns a half-share in the assets, but it is believed that its co-owner, in most cases the affiliated Centro Retail Trust, will also sell its interest, giving buyers clear title over the entire centre.
Marketing of a $1 billion portfolio of the fund's properties, known by some in the industry as mini-CAWF, is also set to begin any day.
All asset sales, including the CAF deal, need to be agreed to by Centro's syndicate of banks. A number of those are due to finalise a funding deal for Centro tomorrow.
That agreement is believed to allow the distribution of proceeds from asset sales between the banks.
The group's American lenders have extended support to December. The most recent funding extension, negotiated with a group known as the local lenders, was almost derailed at the last minute by disagreement between the banks.
One financial-sector source said that preparations for this Friday's agreement were going smoothly and there did not appear to be big differences between the lenders.
Ends.
Cheers, Pie :-)
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