Australia's Centro Posts $1.8 billion Year Loss

Centro Properties Group, an Australian victim of the subprime crisis that is struggling to restructure, reported a A$2.06 billion (US$1.8 billion) full-year loss on Friday, including more than A$1 billion in property revaluations.


Centro, which owns about 670 U.S. shopping malls, had posted a profit of A$470 million in the previous year.

Centro ran into trouble earlier this year when it was unable to refinance short-term debt as world credit markets seized up. It has expanded rapidly in the U.S. last year using debt finance.

Centro and its affiliates have a total of A$7.4 billion of debt expiring by the end of this year, and already have had several extensions from bankers. Agreements with U.S. bankers expire on Sept. 30 and with Australian bankers on Dec. 15.

The group had warned on Monday it was not going to secure any equity investment by a December deadline, bringing it one step closer to collapse, and instead was likely to ask its lenders to convert some debt into equity.

Centro made a small dent in repaying its debt in July when it announced the sale of about 30 of its U.S. malls for $714 million. But the sale of more than A$1 billion of Australian shopping malls has stalled.

"We think it's highly unlikely to sell enough assets to address the full debt load. Its fate looks still well and truly in the laps of its lenders," said JP Morgan analyst Rob Stanton in a research note ahead of the results.

In a statement on Friday, Chief Executive Glenn Rufrano said Centro Properties had total debt of A$6.56 billion, and gearing of 73.9 percent.

He added that before the property revaluations, asset impairment of A$772 million and other one-off items, underlying profit was A$242 million.

Centro affiliate Centro Retail Trust reported separately on Friday that it has total debt of A$5.1 billion, of which A$2 billion falls due this year.

Centro Retail reported a net loss of A$868 million for the year, largely due to a property write-down of A$883 million.

Centro Properties is the worst victim of the debt crunch among Australia's real estate investment trusts. But others, like GPT, are also cutting payouts and selling assets to pay down debt piled on in expansion sprees over the previous four years.

Another local subprime victim, investment fund Allco Finance Group, reported a full year loss of A$1.73 billion ($1.5 billion) on Friday, and said it would sell assets and scrap dividends.

Allco said it would change its business model in a bid to become less reliant on debt and less exposed to the global credit crisis and deteriorating financial markets.

Centro shares have slumped 83 percent this year, the biggest loser in the A-REIT index, which has fallen 34 percent. They rose as much as 16 percent in early trade, after touching a record low earlier this week of A$0.15.