UPDATE 2-Centro says equity investor unlikely by year-end

(Adds analyst comment)

By Victoria Thieberger

MELBOURNE Aug 25 (Reuters) - Centro Properties Group (CNP.AX), an Australian victim of the subprime crisis, said it was unlikely to secure equity investment by a December deadline, making it dependent on winning yet another debt extension from its bankers.

The property group's shares took another hit following the statement on Monday, falling as much as 16 percent but recovered to trade 9 percent lower by 0110 GMT. The stock has plunged some 90 percent since the company first announced debt problems in late 2007.

"We regard the company as effectively on life support," said BT Investment Management portfolio manager Peter Davidson. "They are relying on all the banks to agree to roll over the debt, that is the issue."

Centro said it could give no assurance that it would be able to win further debt extensions.

"The group believes that, in particular given the current difficult capital market conditions, an acceptable proposal capable of being implemented by Dec. 15 is unlikely to be forthcoming," Centro said.

Centro, which owns about 670 U.S. shopping malls, has been pursuing asset sales and a recapitalisation of the group to help pay down A$5.3 billion ($4.6 billion) in debt.

But it also needed to secure secure equity investment and sell assets to help restructure the company and reduce its debt load.

Centro and its affiliates have already had several extensions from its bankers, with current agreements with U.S. bankers due to expire on Sept. 30 and with Australian bankers on Dec. 15.

It said in a statement that none of the proposals it had received so far for new equity provided an acceptable outcome for stakeholders.

Longer-term debt extensions were required to pursue a recapitalisation over a longer time frame, Centro said.

Press reports have said private equity investors including Blackstone Group (BX.N) were considering taking a stake in Centro, or in separating its Australian and U.S. malls.

"Whilst banks have provisioned for their exposure to date, it would be of some concern to lenders that neither asset sales or an equity injection is a near-term possibility," said a hedge fund manager who asked not to be named.

Centro said it had begun preliminary talks with its bankers on converting a portion of its debt into some form of hybrid security, which could affect the value of existing ordinary shares.

"Suggestions that a debt/equity-hybrid swap may be required would be highly dilutive to current equity holders and cause greater concerns to syndicate banks and note holders," the fund manager said.

Centro ran into trouble after a rapid expansion in the U.S. last year, when it was unable to refinance short-term debt as credit markets seized up.

Centro's main local bankers include 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). (Additional reporting by Cecile Lefort) ($1=A$1.15) (Editing by James Thornhill; Editing by Anshuman Daga)