UPDATE 2-Australia's Centro sells U.S malls for $714 mln

(Adds analyst comment, background)

By Victoria Thieberger

MELBOURNE, July 15 (Reuters) - Centro Properties Group (CNP.AX), a high-profile Australian victim of the global credit crunch, is selling some of its U.S. shopping malls for $714 million to pay down debt, sending its shares up as much as 35 percent.

Centro said on Tuesday it was selling 29 of its Centro America Fund's 31 malls to a private real-estate investment adviser, which it did not identify.

Centro, which owned about 700 U.S. malls before Tuesday's deal, has received several extensions on about A$2.8 billion ($2.7 billion) in debt which now falls due in December, and is selling assets to help reduce its debt load.

"The fact they have been able to get a transaction done is positive in the current environment. There's just not much happening in property markets in the U.S.," said Constellation Capital Management investment manager Richard Morris.

"But they've got a long way to go to restructure the group and to reduce their debt levels further," he said.

The sale was at a 10 percent discount to the properties' previous book value, Centro said. On its website, Centro put the value of the Centro America Fund (CAF) assets at about A$1.2 billion.

"In the current environment, maybe that wasn't such a bad outcome," said Morris, referring to the 10 percent discount. "Further falls in property values are certainly possible, particularly in the U.S."

Centro will continue to provide management and leasing services for the 29 malls for at least a year, maintaining a valuable source of fees.

A company spokesman told Reuters Centro planned to keep the two U.S. malls in the CAF portfolio it did not sell.

The malls it sold included the Morris Hills Shopping Center in New Jersey, Spring Mall in Milwaukee and Heritage Square near Chicago.

He said talks were continuing with potential buyers of another Centro wholesale fund, the Centro Australia Wholesale Fund, with A$2.6 billion in local shopping centre assets.

The group has had to sell assets in a tough market to meet banks' conditions on the loan extensions.

Centro and its affiliate, Centro Retail Trust (CER.AX), borrowed heavily last year to fund a rapid expansion in the United States, but ran into trouble in December when it was unable to refinance maturing debt after credit markets dried up.

Several Australian companies have been hit by fallout from the global credit crunch, most recently investment firm Babcock & Brown BNB.AX whose shares lost half their value on worries about debt levels.

Another troubled asset manager, Allco Finance Group AFG.AX, said on Tuesday it had reached a deal to refinance some A$691 million of debt till Sept. 2009.

Centro and its affiliates have a total of some A$5.3 billion in debt which now falls due Dec. 15. Its shares have fallen about 90 percent since it revealed its debt problems.

Centro holds a 45.1 percent direct stake in CAF, and its managed funds own another 49.9 percent stake. ($1=A$1.03) (Editing by Jean Yoon)