Source: www.theage.com.auCentro gets debt extensionMay 7, 2008 -...

Source: www.theage.com.au

Centro gets debt extension
May 7, 2008 - 7:21PM

Centro Properties Group, the Australian owner of about 650 US malls, halted trading in its shares as the Wall Street Journal reported the company may be granted an extension to December 15 to repay lenders owed $US4.9 billion of debt.

Centro won the extra time by agreeing to let WestLB AG, owed less than $200 million, opt out of the accord by early June after it examines financial information provided by the real estate trust, the newspaper said, citing unidentified people familiar with the matter. Melbourne-based Centro and its Centro Retail Group unit announced the share-trading halts in a statement today to the Australian stock exchange.

Centro stock has plunged more than 90 percent since December after global debt markets seized up and the company was unable to raise funds. An extension of Centro's debt deadline will give the company more time to sell assets or stakes in its funds and persuade investors and lenders it should retain a collection of malls that stretches from Perth, Western Australia, to Yonkers, New York.

Australian lenders and US noteholders owed $2.8 billion granted Centro another week to renegotiate debt on April 30. US and European banks in February gave Centro until the end of September to refinance loans owed them, provided other creditors granted a similar extension.

Total debt being negotiated by Melbourne-based Centro is $6.6 billion, the company said May 1. About $1.2 billion is owed by the company's real estate investment trust, Centro Retail Group.

Debt Reprieve

WestLB had balked last week at granting the debt reprieve to December 15 because it had just received a $US7.8 billion bailout from the European Union and wanted more time to consider the deal, the Journal reported.

If WestLB reneges, Centro or its other lenders will have to pay the claims or the mall owner could end up in the Australian equivalent of bankruptcy court, the newspaper said. Centro probably will announce the deal some time today, the Journal said.

Centro posted a record $1.1 billion net loss for the six months to December 31, compared with net income of $157.3 million a year earlier.

The company wrote down $578 million on US-based New Plan Excel Realty, which it purchased last year for $5.2 billion in the biggest US acquisition by an Australian real estate investment trust. Glenn Rufrano, who took over as Centro's chief executive officer in December, was head of New Plan at the time of the sale.

About 62 percent of Centro's assets are in the US where its properties lost 8.8 percent of their value amid slowing retail sales and a potential recession, according to the company's first-half earnings report.

Provisions for underperforming loans to companies including Centro have helped sap earnings at Australia's biggest banks amid the global credit squeeze. St. George Bank, the nation's fifth- largest, this week posted its first profit decline in six years.

Bad debts rose 27 percent after St. George made loans to indebted companies including Centro Properties, which owes the bank $458 million.

More than $4 billion was wiped from the Centro's value in December after debt markets including the US commercial mortgage-backed bond market shut and the company was unable to raise funds. Centro has total debt of $17.5 billion, equal to 75.2 percent of combined debt and equity, it said in February.

Former Chief Executive Officer Andrew Scott borrowed to buy $9 billion of malls over two years then spun off the centers into 34 syndicates, three wholesale funds, two unlisted property funds and one listed property fund, which Centro then managed for a fee.

Centro is fighting to retain management rights of some of its property syndicates after Pelorus Property Group Ltd. approached investors with an offer to reduce fees and boost.

Centro's lenders include Commonwealth Bank of Australia, Australia & New Zealand Banking Group Ltd., National Australia Bank Ltd., JPMorgan Chase & Co., Royal Bank of Scotland Group Plc and BNP Paribas.


Ends.

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