The Wall Street Journal-20080216-Centro Properties Secures Debt Extension
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Centro Properties Secures Debt Extension
Full Text (444 words)Centro Properties Group cinched a last-minute deadline extension on $3.4 billion of debt coming due, but the shopping-center operator's problems deepened as it disclosed a $1.37 billion error in accounting for debt on its books.
Centro, which owns shopping centers in U.S. and Australia, had sought an extension from its lenders since announcing in December it couldn't refinance debt it incurred in its $3.7 billion purchase last year of New York-based New Plan Excel Realty Trust. The new pact with the lenders, which generally pushes the deadline to April 30 from Friday, is an early victory for Glenn Rufrano, the former New Plan Excel chief executive promoted to Centro's CEO post last month in a shake-up.
The extension will allow Centro more time to assess an equity sale and bids for some of its holdings to raise capital to pay down its debt. Overall, Centro has roughly $15 billion in debt, analysts say.
Even as Centro won the extension, it suffered another setback. The Melbourne-based company disclosed it underreported the amount of short-term debt, due within 12 months, on its parent-company books last year by nearly $1.4 billion. Instead, Centro listed that debt as due after 12 months. Only $190 million of it has since been refinanced with later maturities. The adjustment would more than double the problematic short-term debt on Centro's books to more than $2.3 billion but leave its overall debt tally unchanged.
Centro relies heavily on outside investors to provide most of its capital for acquisitions. At the center of Centro's strategy are investment funds that it forms to accumulate investors' contributions and hold majority stakes in its properties while Centro retains a minority share.
To raise capital, Centro is attempting to sell its interest in two of its funds that cater to institutional investors. Centro's Australia Wholesale Fund holds 28 shopping centers in Australia and New Zealand valued at more than $2.3 billion. It holds about $800 million in debt, according to Citigroup analyst Peter Cashmore. Centro holds a 50% stake in that fund.
The other institutional fund, the Centro America Fund, owns 32 U.S. shopping centers valued at nearly $1.1 billion. The fund carries debt of roughly $500 million, according to Mr. Cashmore. Centro didn't make much progress attracting outside investors to the fund, and thus Centro still owned 91% of it at last public disclosure.
Yet determining a value and pricing for the properties held by the institutional funds likely will prove difficult since few comparable deals have taken place as of late, said Jan Svec, an analyst with Fitch Ratings Inc. "I think there will be folks interested," Ms. Svec said. "The question is at what price?"
