trading halt signals end is near

Trading halt signals end is near

January 12, 2008

SQUABBLING bankers, anxious to retrieve $1.2 billion invested in Centro, helped push the struggling property giant into a trading halt yesterday.

The decision by senior management to place Centro's two listed arms -- Centro Properties Group and Centro Retail Group -- in a trading halt has renewed fears that the group is near collapse.

Centro's financiers -- which include the Commonwealth Bank, NAB, ANZ, St George and the Bank of America -- are understood to be locked in debate about which lenders hold priority debt.

That debate has been aggravated by Centro's complex structure, with lenders also debating whether debt is secured or unsecured and whether individual loans should be classed as short-term or long-term.

The share prices of Centro Properties Group and Centro Retail Trust fell throughout the week before nosediving on Thursday following reports that the shopping centre giant was in discussions with the corporate regulator.

Aequs Securities institutional dealer Ric Klusman yesterday said: "The general feeling by market participants is that they are gone."

It was also revealed yesterday Centro's three big Australian lenders had hired insolvency group McGrath Nichol to prepare an investigating accountants' report on the company.

The trading halt, expected to be lifted by Tuesday, could benefit Centro management if the company's bankers can come to agreement by that date, as it will prevent further price falls until then.

Any white knight would need very deep pockets, and the likelihood of one emerging was rapidly decreasing, Macquarie Equities division director Lucinda Chan said.

"To refinance that amount is a big ask in an environment where credit is tight," Ms Chan said yesterday.

"The balance of the debt is medium to long term in nature so it is not too difficult, but the bottom line is that you need be able to find a banker that is likely to do it.

"I would like to think they would survive, but in an environment where there is so much uncertainty, where we are beginning to see the skeletons of the US sub-prime coming through and the number of write-offs is rising, it's not going to be easy."

The move by the NAB, Commonwealth and ANZ to hire McGrath Nichol to prepare an investigating accountants' report highlights the banks' concerns about Centro.

ANZ has about $500 million in unsecured loans to Centro, making it the company's biggest unsecured creditor among the Australian banks.

The bank's loans to Centro total about $1.2 billion. The Commonwealth has similar loans with Centro, but its unsecured loans total $300 million. NAB has $1.1billion in total loans, of which $350 million is unsecured.

Separately, Queensland fund manager MFS yesterday offered to take over as administrator of Centro's 36 unlisted property syndicates.

MFS, which manages about $5billion in assets, said it was interested in being "supervisor" only and was not interested in buying any of Centro's underlying property assets.

Centro suffered a $5 billion meltdown in mid-December after it announced it had been unable to refinance $3.9 billion in debt as a result of the US credit crunch.

On Thursday, more than $600 million was wiped from the two listed Centro entities -- the biggest day of trading since the December meltdown -- after it was revealed the company was in discussions with the Australian Securities and Investments Commission.

Neither Centro nor ASIC would comment on the nature of those discussions, but ASIC is likely to be interested in Centro's failure to properly account for more than $1billion of debt in its June 30 accounts.

http://www.theaustralian.news.com.au/story/0,25197,23040324-643,00.html