RealEstateFlux

Centro’s plans to raise capital were dealt another blow this week as its agreement to sell a portfolio of U.S. retail properties was terminated.

FT.com | Peter Smith | September 15, 2008

Centro, which has a large portfolio of shopping malls in the US, Australia and New Zealand, said in July it had agreed to sell 29 of the 31 properties in the Centro America Fund to a private real estate investment advisor for A$735m (US$592m), at a 10 per cent discount to book value.

After six extensions in the last year, Centro Properties Group has approached its Lenders with a new plan in the hopes of getting more time. Centro is floating the idea of offering a hybrid security to its Lenders allowing them to swap debt for equity in the company. The problem is that this would further dilute the value of existing shareholders, who have already lost 96% of the value of their stock since December 2007.

The initial thrust of Centro’s turnaround strategy was to offload assets, and it has already sold 29 US properties for $714 million according to the Wall Street Journal. Yet Centro is now saying that they will need to obtain new equity commitments in the firm to stay afloat, and Blackstone and others have considered options including breaking off what is left of their US portfolio. Yet looking into the bottom of Q3 2008, Centro believes it is unlikely that new equity can be closed in time to comply with its Lender’s late September and Mid December deadlines.

IHT | August 25, 2008

“While 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 because he was not authorized to speak to the news media. Centro said it had begun preliminary talks with its bankers on converting a portion of its debt into some form of hybrid security.”

The Wall Street Journal | Andrew Harrison | August 26, 2008

“Centro will look to obtain debt extensions from its lender group, and has started talks with lenders on terms, the company said. Centro’s Australian lenders include Australia & New Zealand Banking Group, Commonwealth Bank, National Australia Bank and St. George Bank Ltd. Foreign lenders include J.P. Morgan Chase & Co. and Bank of America Corp.”