Securities in Centro Properties Group again lost ground yesterday as analysts pondered what assets the besieged property trust could sell to refinance its maturing debt.
But there was a rare ray of hope for the associated shopping mall arm, Centro Retail Trust, where the units rose late to be up 2.5c on the day, ending a horror downward spiral for the time being.
They actually bounced from an all time low of 27c.
CER units finished at 35c and while the small rise would have been welcome and provides some respite, it isn't out of danger yet because of the woes at the associated Centro Properties (CNP).
CNP shares fell another 14c or more than 20% to 46c.That's a new all time low for the stock.
It's a judgment by nervy investors that there could be very little left over for shareholders once the asset sales, restructuring and fund raising has finished to repay all the due debt; once the precise figure is known.
CER needs to refinance $3.9 billion in debt by a February 15 deadline and is look at selling assets to raise capital and reduce its murderously high gearing levels.
CEO Andrew Scott was replaced Tuesday by the head of its US operations, Glenn Rufrano.
UBS analyst Stephen Rich said the security prices would remain volatile while questions about the firm remained unanswered.
"Volatility will remain at heightened levels for so as long as there continues to be a lack of meaningful disclosure," he said in a research note to clients.
Mr Rich said Centro's best bet would be to liquidate its domestic assets to meet its debt obligations.
Goldman Sachs JBWere (GSJBW) analysts also suggested that Centro should consider selling equity interests in some of its local assets.
The broker singled out the Centro Australia Wholesale Fund (CAWF), Direct Property Fund, CMCS Australia and property syndicate manager MCS.
"On our estimates, approximately $2.3 billion could be potentially raised from those assets sales," its analysts said in a note yesterday to clients.
GSJBW said a likely buyer of the assets could be a conservatively geared property trust like Stockland Ltd or Lend Lease Corporation Ltd or a wealth manager with a property arm like AMP Ltd or Westpac Banking Corporation Ltd.
Centro said on Tuesday that there was significant interest in its $2.5 billion CAWF, and the Centro America Fund, which has a portfolio of $1.1 billion of US properties.
The big four Australian banks hold a combined $1 billion in unsecured Centro loans and that US investment bank JPMorgan is owed more than $2 billion after it was the lead arranger for the loan to buy the US-based New Plan Excel Realty Trust.
Centro also owes US investors $US450 million in private placement debt but has rejected claims that it might have defaulted on some of the notes.
The gloomiest was Merrill Lynch research analyst Juan Sanabria who said he was skeptical, given the current market environment, that Centro would be able to extend the current deadline.
"We think the notice of default is clearly bad news and complicates negotiations," he said.
"We suspect the banks involved are getting increasingly nervous about their seniority in the event of bankruptcy given Centro's complexity and the macro environment in the US with a weakening consumer and increasing risk of a recession," the firm told clients yesterday.
"It is unclear how senior the US private placement noteholders are relative to other debt holders."
Centro warned on Tuesday that its current debt levels might be higher than it thought, although the firm said its total reported current and non-current debt of $3.60 billion is unchanged.
"They have still yet to identify whether the full year 2007 current liabilities classification was indeed correct, raising questions of further contingent liabilities," UBS's Mr Rich said.
Merrill Lynch said "Mr. Scott's agreed to a payment of $1.5M and will also be entitled to a further $1.5M on 31/3/08 if he satisfies his consulting obligation. Given the company's situation we view Mr. Scott's pay as excessive.
"It is a bit surprising to us that Mr. Scott stepped down before the 15 February deadline given his intimate knowledge of the company's complicated and intertwined businesses.
"We fail to see the logic in replacing Mr. Scott at this point in the process given the looming deadline as opposed to when the company first announced its refinancing struggles in December.
"However, we acknowledge that Mr. Scott's credibility with investors was severely tarnished and ultimately needed to be replaced.
"We think long term, Mr. Rufrano's appointment is positive, if Centro remains a going concern, and will help to rebuild credibility.
"Mr. Rufrano is a logical choice given CNP will likely be a predominately US focused company post asset sales. However, we believe the change of CEO makes negotiations with the various banks involved more complex."
