Centro Properties, the debt-laden Australian shopping mall owner, on Monday admitted its plan to recapitalise would not be satisfied by asset sales alone and that efforts to raise new equity in the next few months are likely to fail.
The company was one of Australia’s first global credit crunch victims when last December it defaulted on A$1.3bn ($1.1bn) of loans and was forced into an informal “work-out” by its bankers.
Centro said it would ask its bankers for longer-term debt extensions from December 15 – the deadline for paying back A$2.3bn to its domestic lenders and $450m to its US note holders. The extension held by its other US lenders, which totals $1.1bn, expires on September 30. Centro said: “In the absence of a recapitalisation solution in the short term, the group has commenced discussions with the lender groups on possible terms for longer-term debt extension and stabilisation of the group.”
The news further eroded Centro’s shares, which have lost 95 per cent since last December. On Monday, they closed down 9 per cent at A$0.20.
Centro, which owns about 670 shopping malls in the US, has sold $195m in assets and has a conditional contract for the sale of its American portfolio for $714m.
One analyst said: “They are selling some properties, but progress is slow. There are not a lot of buyers of portfolios of the scale that Centro has plus Centro has a lot of poorer quality assets. The problem is there are some banks in there with minimal exposure to Centro who may well choose to have this situation resolved quickly rather than have it worked out over a long period of time.”
But Australian banks have significant exposure to Centro. Analysts said the issue was how many of the banks were willing to let it continue operating and systematically retire debt rather than putting it into involuntary administration.