Australia's Centro Wins $2.67 Billion Loan Reprieve
Centro Properties Group, one of Australia's biggest casualties of the global credit crunch, won more time to repay about A$2.8 billion (US$2.67 billion) in debt, sparking a rally in its
shares on Monday.
Centro shares climbed 10 percent to a high of A$0.42 on the news but the firm is still worth a fraction of its market value in December, when it revealed its debt problems.
Centro said it had won a seven-month extension on its debt to Dec. 15.
Banks agreed this month to a loan extension in principle, but it was dependent on a number of conditions being met, including the banks agreeing to the process for refinancing or asset sales.
The debt extension -- the fourth granted to the firm -- gives Centro time to pursue asset sales to raise cash. If the conditions had not been met, all bets would have been off and the company likely pushed into insolvency.
Centro, which owns about 700 U.S. shopping malls, borrowed heavily last year to fund a rapid expansion in the United States but ran into trouble when credit markets dried up and it was unable to refinance maturing debt.
By the May 30 deadline, Centro also had to finalize another A$155 million credit line to pay for capital spending, fees to advisers and higher borrowing costs.
The extension to the A$2.8 billion in debt includes A$2.3 billion owed to the Australian banks and $450 million owed to U.S. private noteholders.
The deal also triggers an extension to Sept. 30 of A$2.5 billion of U.S. bank debt associated with Centro affiliate Centro Retail Trust, which had been subject to the Australian portion of debt winning an extension.
Centro said on Monday the Dec. 15 extension was subject to conditions, including its bankers agreeing on the terms of asset sales by Sept. 30.
Centro's main local bankers include Australia and New Zealand Banking Group,Commonwealth Bank of Australia,National Australia Bank and St George Bank.
The company's shares have fallen about 90 percent since it revealed the debt problems in December, and are trading at a fraction of their 2007 high above A$10.
Centro is also fighting two class action law suits from shareholders alleging the group failed to disclose the full extent of its debts last year.