The global credit crunch has today hit shopping centre owner, Centro Properties Group (CNP) whose stock fell by as much as 72.9% on Monday after it downgraded its earnings forecast for financial year 2008, and decided not to pay a first half distribution.
Shares fell to a three-year low of $1.545 by 11am AEST.
More than 57 million shares had changed hands.
While Centro revised down its ‘operating distributable profit' per security to 40.6 cents per share from 47 cents per share for the year ending 30 June 2007, unitholders will not receive a distribution payment in the first half.
"…for prudence in the current circumstances and in order to ensure the broadest possible range of long term financing options, Centro will not pay a distribution for the half year ending 31 December 2007. A decision as to when distributions will be reinstated will be made following the outcome of the strategic review."
Centro's high gearing levels are having a considerable impact on profitability. The company said increased costs associated with the extensions of the debt facilities, and the expected costs of debt refinancing, will have an adverse effect on earnings and forecast distributions.
It is currently negotiating the refinancing of $1.3 billion and has interests in joint venture debt refinancing of $1.4 billion.
However, already high levels of debt are hampering the refinancing effort.
"It has become clear that to secure longer term financing in the current illiquid credit market,
Centro will need to reduce its gearing level significantly."
This raises the spectre of asset sales or equity raisings, providing further worry for investors.
The company has also encountered problems in regard to its growth plans in the United States.
"Restrictions imposed on Centro's capital expenditure under the terms of the financing extension will restrict Centro from carrying out some of its growth plans in the United States which had been expected to generate higher earnings," Centro said.
In a separate statement to the stock exchange the company has also suspended applications and withdrawals from both Centro Direct Property Fund International (DPFI) and Centro Direct Property Fund (DPF).
The Responsible Entity for Centro Direct Property Fund believes this to be in the best interests in investors in the funds.
"Both the DPF and DPFI currently have significant investments in Centro's managed funds. The issues outlined in Centro's ASX announcement may lead to a significant increase in withdrawals from the Funds which could have a material impact on each fund's liquidity," manager for Direct Property Funds Alan Hayden.
