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Australia's Centro Says Still Viable, Shares Rebound

Shares of Centro Properties Group, which owns and manages 700 shopping malls in the United States, rebounded as much as 85 percent on Wednesday after the company reassured investors it was still viable, helping it recover from two days of heavy falls.

Centro said in a statement it was comfortable about the ongoing viability of the business, which was continuing to perform strongly.

Centro shares traded up 64 percent at A$1.32, off a peak of A$1.495, but well above Tuesday's life low of A$0.42 hit after it became the latest victim of a global credit crunch, saying it had been unable to refinance A$1.3 billion (US$1.1 billion) in maturing debt.

The stock had tumbled 85 percent over the previous two sessions, mired in the subprime debt crisis that has dramatically pushed up the cost of lending and virtually closed down the U.S. commercial mortgage-backed securities market that Centro had previously used to refinance debt.

Centro, the fifth-largest mall owner in the U.S., has been expanding aggressively using debt. It sold part of each shopping centre it owned into a complex network of managed funds and much of its debt is held off balance sheet.

"The group reiterates that it is not under any obligation to sell assets and would only do so selectively if necessary," Centro said. "Neither Centro nor any of its managed funds are in breach of any lending covenants."

Centro did, however, say that its options included selling interests in its managed funds, joint ventures, and asset sales.

The firm has until Feb. 15 to renegotiate the debt, but analysts have said it may have to conduct a fire sale of some of its Australian shopping centres to reduce gearing levels to satisfy the banks.

The company's shares had already recovered in morning trade on the view that buyers would emerge for its assets.

"A pile of hedge funds came in yesterday on the view a Mirvac or a Westfield will pick up the Australian assets, and plenty of U.S. players will pick up the U.S. assets, so it will be carved up and sold off. There is some equity value remaining," said one fund manager who asked not to be named. He speculated that hedge funds could again be behind the buying on Wednesday.

Centro said on Wednesday if it decides to sell assets in Australia or in the United States, it would selectively divest assets that will allow it to repay short-term debt.

Shares in affiliate Centro Retail Group, which is renegotiating an additional A$1.2 billion in financing, rose 32 percent to $0.85.