Centro Properties still working on debt extension

MELBOURNE Fri Mar 28, 2008 1:09am EDT

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MELBOURNE (Reuters) - Australia's debt-laden Centro Properties Group CNP.AX, which owns 700 U.S. shopping malls, said it was pleased with progress on extending an April 30 refinancing deadline, but had not yet reached an agreement with creditor banks.

Optimism in the market that Centro would secure a deal saw its shares rise as much as 26.5 percent on Friday.

Centro, which borrowed heavily last year to fund a rapid U.S. expansion, faces an end-April deadline on A$5.4 billion ($5.0 billion) of debt, and is under pressure to sell assets to raise cash.

Centro, one of Australia's biggest casualties of the global credit crunch, ran into trouble when credit markets froze up last year and its usual avenues of borrowing were closed.

Centro's comments followed a report in The Age newspaper that a decision to extend the Australian banks' deadline from April 30 to September 30 had been made at a meeting of all financiers last week in San Francisco.

Centro told Reuters no agreement had been reached, although the banks were working on an extension.

"While the Australian banks have not formally extended Centro's financing deadline beyond April 30, they have begun work on the extension," a Centro spokesman said.

Centro was pleased with the positive comments reported by bank representatives, which reinforced Centro's belief that its underlying business was sound, he said.

Centro shares rallied 12 percent to A$0.275 and touched a high of A$0.31, but are still down more than 95 percent from highs above A$10 a share in May last year.

"I'm hopeful Centro will survive in some form. Clearly the debt became excessive for the banks in this environment," said Argo Investments Managing Director Rob Patterson.

"Centro's assets are in the main retail shopping centers with ongoing cashflows, and one imagines they should be able to be servicing their debt," said Patterson, who does not own Centro stock but owns shares in its Australian creditor banks.

Centro's main local bankers are Australia and New Zealand Banking Group Ltd (ANZ.AX), Commonwealth Bank of Australia Ltd (CBA.AX), National Australia Bank (NAB.AX) and St. George Bank Ltd SGB.AX.

It also has U.S. bank creditors including JP Morgan (JPM.N) and Bank of America (BAC.N).

Without citing sources, The Age said the bankers would prefer an orderly sale of Centro's assets rather than the fire sale that was looming to meet the April 30 cut-off.

The report said potential buyers have said they would prefer to buy separate assets rather than the Centro stakes in two wholesale funds that it is offering for sale.

($1=A$1.09)

(Editing by Kim Coghill)

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