Australian credit crisis casualties sell assets

Shares in Centro Properties and Allco Finance, two of the biggest Australian casualties of the global credit crisis, rose on Tuesday after both companies sold assets as part of efforts to improve their balance sheets.

Centro, an Australia shopping mall operator that also has assets in New Zealand and the US, on Tuesday said it had sold 29 of the 31 properties in the Centro America Fund for A$735m ($720m). The price struck represents a 10 per cent discount to the book value of the properties.

Tuesday’s sale is part of a divestment strategy by the shopping mall group aimed at reducing Centro’s debt, which stands at A$6.6bn. The group spooked the market in December when it defaulted on A$1.3bn of loans and was forced into a “work-out” by creditors.

Since then Centro has won a number of extensions from its lenders on A$2.3bn of short-term debt, which has to be repaid on December 15. It owes A$462.9m to US private placement note holders.

Centro said on Tuesday it also expects to raise a further A$1bn shortly by selling a portfolio of four of its Australian shopping centres.

Earlier this month, Centro said one of its unlisted property trusts could be wound up and its A$309m portfolio of shopping centres sold to help pay down debt.

Separately, Allco, the aircraft leasing and fund management group that earlier this year also fell victim to the crisis of confidence in the credit markets, said it had reduced its borrowings from more than A$1bn through asset sales.

David Clarke, Allco’s chief executive, said on Tuesday the company has refinanced its senior debt facility and extended the maturity of its borrowings until September next year.

The new facility incorporates a repayment schedule that requires Allco to reduce its debt and contingent commitments from A$892m to A$400m by next June. The company stressed the new agreement does not contain any market capitalisation review clauses.

The debt funding, while welcome, comes at a huge cost with Allco agreeing to pay a high margin over the usual borrowing rates.

“Despite the very difficult conditions being experienced in world financial markets, including higher debt margins reflecting the tougher credit climate, we are achieving key milestones in lower gearing levels,” said Mr Clarke.

Allco has recently announced the sale of its Singaporean real estate business and US wind farm interests which will cut its borrowings to A$691m by the end of July.

In May Allco warned that full-year losses could top A$1.5bn.

Centro and Allco have both lost nearly 95 per cent of their value in the past year. On Tuesday Centro’s shares closed up 6.5 per cent at 24.5 cents, while Allco’s rose 10.7 per cent to 41.5 cents.