Bankers Throw Centro Lifeline

Sydney Morning Herald

Wednesday December 17, 2008

Carolyn Cummins Commercial Property Editor

CENTRO Properties has been thrown a lifeline in a $5 billion-plus deal involving hybrid convertible notes and a debt-to- equity swap, for at least the next three years.

In an 11th-hour deal struck with its bankers, the retail landlord will now proceed with its asset sales program, and finalise details by which its financiers end up owning as much as 90 per cent of the group.

Centro was given a one-month extension last night to finalise documents with its bankers, after which the complex financing package will remain in place until 2011.

Centro and its associate, Centro Retail Trust, will resume trading today, after a two-day trading halt. It is expected the shares will come back on a higher level than the pre-halt prices of 8c each.

Of the $5.05 billion in senior secured debt owed to the Australian lending group and US private noteholders, $1.05 billion will be replaced by a hybrid security and $4 billion will be converted into term debt loans; the $1.05 billion hybrid security will be senior secured convertible bonds subscribed for by the Australian lending group. The hybrids will have a seven-year maturity and the potential for conversion into ordinary stapled securities. This deal is subject to approval by Centro investors.

It is a year to the day that Centro first revealed it was collapsing under a mountain of debt. The founder and former chief executive, Andrew Scott, said at the time that the group had been hit by the subprime debt crisis in the US.

It became apparent in January this year that Centro could not survive unless it reached a deal with its bankers. The securities were then trading at nearly $10, giving the group a market value of about $12 billion - this week it is closer to $200 million.

Centro's bankers in the Australian-led syndicate are the Commonwealth Bank, NAB, ANZ, the German bank WestLB, BNP Paribas, Sumitomo Mitsui Banking Corp, JPMorgan and Royal Bank of Scotland. The American syndicate includes Bank of America, Wachovia, KeyBank and JPMorgan.

After five debt extensions, organised by the chief executive, Glenn Rufrano, the lifeline to keep the country's second largest retail landlord afloat has been secured.

Mr Rufrano said last night that the $4 billion of remaining existing senior secured debt owed to the Australian lending group and US noteholders will be converted into term loans maturing on December 15, 2011.

Furthermore, 14.9 per cent of Centro's existing securities will be issued on or before January 15 next year to the Australian lenders and US noteholders on a pro rata basis. Cash raised through the placement will be used to pay off outstanding lender fees and expenses.

© 2008 Sydney Morning Herald

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