smh an extra week for centro

Carolyn Cummins
May 1, 2008

CENTRO PROPERTIES, the country's second-biggest owner of shopping centres, has been given a week to finalise details with its bankers to enable it to proceed to raise the cash necessary for its long-term survival.

The retailer, which was on the brink of collapse in December last year, issued a four-line statement yesterday saying the financiers had agreed to roll over its $4.9 billion debt repayments until May 7.

It is expected this deadline will be extended for a further five months, at least, to align the repayments with cash due to Centro's US bankers on September 30.

But this did not appease long-suffering investors, who sold the stock down 4.2c, or 6.3 per cent, to 45.5c shortly after the extension of the deadline was revealed yesterday. Centro Retail Trust was steady at 48c.

"To those that sold today, look forward to buying back in much cheaper before next announcement," one blogger wrote on the HotCopper site. "Such is the damage Centro have done today. Hell, Centro should just schedule an announcement per week! Great fun huh?!"

It was the third extension on debt repayments granted to Centro since it hit the wall in late December. Its troubles were the result of over-extending in the United States just as the global credit crisis was gathering steam.

Since that time the company's value has plummeted, falling from $6.3 billion to $384.5 million at the close yesterday.

The one-week extension covered $2.3 billion in loans from Australian lenders that were due to expire, as well as $500 million in US private placement notes. Centro owes $4.9 billion, and a further $2.5 billion expires before the end of the year, taking 2008 debt facility expiries to $7.4 billion.

"Centro announces a seven-day interim extension on all facilities expiring yesterday in order to allow time for the finalisation of discussions with all financiers and the completion of documentation for a longer-term extension," the company said in a statement to the stock exchange.

The same statement was issued to Centro Retail Trust investors.

The company, which declined to comment, was said to be pleased with the outcome.

It is understood the decision to grant just a week's breathing space is to allow the banks and Centro's management, led by its chief executive, Glenn Rufrano, more time to thrash out terms of the continuing loans.

Fund managers said that meant the group would be paying very high interest charges until cash came into the banks via Mr Rufrano's refinancing program.

Now that the uncertainty in relation to the money owed had dissolved, they said, negotiations on the sale of assets to pay down the debt would begin in earnest.

Mr Rufrano has been telling investors that his plan of asset sales and an equity injection, possibly through the sale of the whole group, is his preferred course of action.