The new chief executive of Centro Properties Group, one of Australia's biggest casualties of the global credit crunch, reaffirmed on Thursday there would be no firesale of assets and said it was optimistic over refinancing talks, sending its shares up 35 percent.
The owner of 700 U.S. shopping malls is, with its affiliates, struggling to refinance some A$3.9 billion (US$3.4 billion) of debt after borrowing heavily to expand over the past two years, and has only three weeks before a refinancing deadline expires.
Glenn Rufrano, who took over as chief executive after the company's troubles and consequent share price plunge forced out his predecessor, told reporters at his first media conference he did not think the banks would jeopardize the firm's viability. "I have comfort that the banks are not going to put themselves in a position with us that will make it untenable, for them and us," Rufrano said.
The comments helped lift Centro shares 35 percent higher to close at A$0.48. The stock is way down from its mid-December level of A$5.70 before it first revealed its refinancing troubles, and even farther off the peak of A$10.06 they had reached last May.
"They are trying to reassure the market that things are under control and they are working through those problems," said Tony Russell, senior equities adviser with ABN AMRO Morgans.
Funding Dries Up
Centro had got into trouble because it used short-term debt to finance long-term investments, and it said last month its usual sources of funding had dried up as credit markets tightened following the U.S. subprime mortgage mess.
Analysts estimate Centro's debts at up to 70 percent of its equity capital.
About two-thirds of Centro's shopping centers are in the United States, with the remainder in Australia and New Zealand. It holds the assets through a complex network of managed funds.
Rufrano, who replaced Andrew Scott on Jan. 15, has spent a week in Australia negotiating with banks, including National Australia Bank, Commonwealth Bank of Australia and Australia & New Zealand Banking.
He travels to the United States on Saturday to meet with banks including JP Morgan and other lenders.
He said on Thursday that Centro had restructured the debt of U.S. holders of $450 million in notes, some of whom had claimed that Centro was in default. The company had denied the claim. Rufrano said the restructuring had been accepted.
Centro will open up its books to interested parties for due diligence on Tuesday, a week later than planned, and said it has had significant interest. Centro is seeking buyers for some of its interests in assets, including the Centro Australia Wholesale Fund and the Centro America Fund, and is looking for an injection of an unspecified amount of equity. It is being advised by Lazard Carnegie Wylie.
Some investors expressed surprise at the rise in Centro's shares on Thursday, noting a significant risk remained.
"It's crazy the stock price is rallying. For us the biggest concern is you've got a stock that has very, very high gearing. It's a very risky place to be, to own this equity," said ING Investment Management portfolio manager Justin Blaess. "You might get compensated with very high returns if it works out, but at the other end of the scale you get zero," he said.