sale trouble, page-2

Source: www.theaustralian.news.com.au/business

Centro CEO warns of sale trouble
Maurice Dunlevy | September 13, 2008

CENTRO'S much vaunted $US714 million ($887 million) US shopping centre fire sale is far from certain, with chief executive Glenn Rufrano warning yesterday that even if the sale went ahead it would be at a lower price.

Mr Rufrano said the contingent sale agreement had left Centro at the mercy of the markets, making it unable to give any assurances that the sale of 29 properties across 15 states would be finalised.

But the Centro chief said there was more certainty about the buyer wanting to pay less than the $US714 million price agreed in mid-July.

"We expect the buyer to re-negotiate the price," he said.

Mr Rufrano said Centro would work hard to maintain the price, but realistically a counter-proposal would come. Centro said in mid-July it had entered into an agreement to sell 29 of 31 properties in the Centro America Fund, a wholesale fund managed by the Centro group.

The $US714 million contract price represented only a 10 per cent discount to book value.

The sale could be critical to Centro's attempts to persuade the banks to grant the shopping group its fifth major debt extension.

Without that extension, Centro has until mid-December to repay almost $4 billion.

Centro has already admitted it cannot pay and used a financial planners' briefing yesterday for its unlisted direct property funds to repeat the message that debt extensions could provide a lifeline.

Mr Rufrano said he could not give any assurances about the future, but longer term debt could allow Centro to remain afloat until financial and property markets stabilised.

Asked if he thought the banks would agree to a debt for equity swap, Mr Rufrano said he did not know, but the current management team was the banks' best hope of getting their money back.

The briefing was told Centro's Direct Property Fund International and Direct Property Fund would collectively receive $US230 million if the US shopping centres sales -- understood to involve a US pension fund -- went ahead.

Both funds, which co-invest in other Centro vehicles as part of the group's complicated ownership structure, have had withdrawals suspended since December 17 last year in the wake of the Centro Properties Group collapse.

Centro said yesterday withdrawals would remain suspended for the foreseeable future.

Unitholders were also warned of likely losses if Centro re-calculated the funds' investment of about $797 million in the Centro Retail Investment Trust based on the head stock's actual share price, rather than net tangible assets.

Centro estimates a 24 per cent fall for the Direct Property Fund International, from 79c to 60c, and a 15 per cent drop for the Direct Property Fund, down from $1.27 to $1.08. Centro Properties Group shares closed steady at 11c yesterday.


Ends.

Cheers, Pie :)