seems promising for CER/CNP and the REIT sectorCentro's waiting...

seems promising for CER/CNP and the REIT sector


Centro's waiting game as loan expires Scott Rochfort
January 16, 2009
CENTRO Properties remains confident its bankers and noteholders will formally consent to a "long-term refinancing and stabilisation" plan as soon as today, despite confirming yesterday the expiry of a $5.05 billion debt facility.

Its Australian and US lenders agreed to a plan for refinancing the debt a month ago, but Centro gave its investors another heart palpitation yesterday when it requested a trading halt and announced it was yet to finalise the new package.

Centro's financiers had agreed in principle to sign the package by yesterday.

Sources close to the stricken property outfit blamed the delay on the complexities and paperwork needed to get 23 lenders to sign the deal. However, no assurances were given that the new debt package was a fait accompli.

Centro and the separately listed Centro Retail Group asked for a trading halt until Monday.

The deal involves $1.05 billion of the debt being converted into hybrid securities that could be converted into Centro shares after seven years. The remaining $4 billion debt would become a new debt facility that expires on December 15.

The main reason Centro has been given the lifeline is the realisation by its lenders that any move to wind up the company could result in a fire sale of the group's assets. The new package will give Centro more time to dispose of its portfolio of US and Australian shopping centres closer to their book value. Centro has already written down the value of its assets by $1.2 billion and goodwill by $772 million. Despite the company's precarious position, its bankers are also providing it enough breathing space to complete the planned refurbishment of some of its centres.

Centro security holders, whose investments have lost about 99 per cent of their value since their 2007 peak, still have little to celebrate.

After announcing the new package last month Centro said it was "unlikely that distributions would be paid prior to conversion of hybrid securities" in 2016. Once the securities convert, they will make up an estimated 90 per cent of the shares in the company, meaning the existing holdings will be heavily diluted.

Centro and Centro Retail Trust will also have a $US1.3 billion ($2 billion) debt that is linked to their Super LLC US joint venture extended to December next year.

Centro's chief executive, Glenn Rufrano, said last month that the deal would provide "the opportunity to pursue an alternative recapitalisation strategy in a more favourable economic environment".