Bankers agree to extend Centro's debt deadline to avoid fire...

Bankers agree to extend Centro's debt deadline to avoid fire sale of assets

CENTRO Properties Group financiers have thrown the group's directors a six-month lifeline to repay $4.2 billion.

The decision to extend the Australian banks' deadline from April 30 to September 30, to coincide with the repayment deadline for the US bankers and bondholders, was made at meeting of all financiers last week in San Francisco.

BusinessDay believes the bankers, who are facing their own debt concerns because of the global credit crunch, would prefer an orderly sale of Centro's assets rather than the fire sale that was looming to meet the April 30 cut-off.

It is believed the bankers have confidence in Centro's chief executive, Glenn Rufrano, but are advising against his equity injection proposal and would prefer asset sales.

Although not all the Australian banks have agreed to extend the April 30 deadline, it is believed they are in discussions and agree that it would take time to raise the cash in a "calm and sensible manner".

The secret Easter meetings were held as Mr Rufrano considered offers for Centro's share in its two wholesale funds. But after much consideration, it is believed its bankers are pressing for a sale of any assets that will reap much needed cash.

One obstacle is that many of Centro's 800 shopping centres and a large number of those in the two wholesale funds, are half-owned by other parties and any sale would trigger pre-emptive clauses.

That would create a messy sale process that could drag on beyond September.

This was recognised by the bankers, who agreed at last week's meetings that time was needed to unwind the contracts or negotiate with the co-owners for an orderly sale of the assets.

The deadline of April 30 was considered untenable if the bankers and Centro wanted to avoid a fire sale.

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

Listed property trust managers have ruled themselves out of making any formal offer for Centro, given the difficulty of raising cash, of which more than $4 billion would be needed, in the current credit environment.

One fund manager said that Centro's underlying businesses were performing strongly, with the company comfortably meeting its interest cover.

Centro also has to reorganise its debt repayments at a time when the global credit crisis has pushed up the price of servicing new loans to levels well above the official cash rate.

The prospects for the sale 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.

Centro's bankers are also said to be happy to keep Centro as the manager of its $2 billion syndicate business, which is under attack from the Pelorus Property Group.

A meeting of Centro's MCS16 syndicate security holders was scheduled for Monday, but that has been postponed.