Centro Properties and its retail trust associate, and ABC Learning Centres are two of the high profile basket cases to have imploded under the weight of the credit crunch, the growing distaste for high debt and risk, and in the case of ABC, funny accounting.
Yesterday we saw ASX statements from the pair: they were not promising, starting with Centro Properties which slipped out news that it had failed to sell a major Sydney shopping centre asset.
Centro Properties securities finished down 1.5c, or 10% yesterday at 13.5c and the associated Retail Trust securities shed 4c or 16% to 20.5c on the news of the failed sale.
The news that it couldn’t find a buyer for the Bankstown Square Centre, in Sydney’s southwest (which wasn’t sent to the ASX), moves struggling Centro Properties and the associated Centro Retail Trust closer towards another confrontation with its financiers, or collapse.
There are now only the best part of three weeks left for its banks and the group to do a deal for an extension. There already have been three debt extensions, without any significant asset sales or progress on a restructuring here or in the US. The group has a deadline of December 15 and now says it’s unlikely its recapitalisation plan will be ready by then.
Earlier this year it released these conditions for the December 15 deadline extension.
"The financing extensions to 15 December 2008 mentioned above are subject to the conditions outlined in our 8 May 2008 announcement whereby the following must occur by 30 September 2008:
"The Australian financiers and US private placement noteholders must be satisfied as to
"Centro’s progress in implementing its strategic plan;
"The US lending group, which is owed in aggregate US$1.1 billion (A$1.2 billion) associated with Centro’s joint venture with CER, agreeing to further extend those facilities from 30 September 2008 to a date no earlier than 15 December 2008; and
"The Australian financiers, US private placement noteholders and the US lending group reaching a further agreement by 30 September 2008 on the terms on which assets can be sold and the proceeds of such sales applied after that date."
The sale of Bankstown Square was to have been a centrepiece of Centro Properties’ attempts to raise funds to remain in business by convincing its various banks that it had a business plan for its future.
But yesterday it was revealed on a website that it had cancelled the sale of Bankstown Square after failing to find a buyer.
It said no "satisfactory offers” were received for Centro Bankstown before the August deadline.
"As advised in correspondence mailed to investors on 3 July 2008, the Syndicate’s 50% interest in Centro Bankstown was marketed for sale in a national advertising campaign which closed in August 2008.
"No satisfactory offers were received through this process and therefore, the Syndicate’s interest in the property will not be sold at this time. Should an acceptable offer be received at some time in the future, the RE may consider selling the property," the responsible entity CPT Management wrote to unit holders in MCS syndicate 28. The letter is on the website of Centro MCS.
Centro warned that any recapitalisation plan could involve debt holders being offered some sort of hybrid share. That would dilute existing shareholders if it was accepted by the lenders.
So far Centro has only been able to announce deals to sell just over $US700 million in assets in the US.
The asset sale program proceeds are small in Australia, with only $US66 million actual in the US. Last week $46 million for a shopping centre in Newcastle.
In July, Centro announced the sale of 29 of the 31 funds in its Centro America Fund for $714 million. That won’t settle until the end of next month.
Last month it said its 129 Australian malls were worth some $9.3 billion and had occupancy rates of 99.5%. It is the second largest mall manager in Australia and the third largest in the US.
Centro Properties reported total losses of $2.053 billion in the year to June and Centro Retail, a loss of $868 million.
Centro Properties has an estimated $A6.6 billion in debt, but some of that is in US dollars and the Australian dollar has dropped by more than 17% against the greenback since Centro’s balance date on June 30.
"While the asset sale program will provide the Group with liquidity and some level of debt reduction, the Group considers that asset sales alone will not provide a long term recapitalisation solution," the company told the ASX in a statement on August 25.
Centro said last month: "The Group has also received and evaluated a number of proposals for new equity. "The Group, in consultation with its lenders, has concluded that no proposal received to date provides an acceptable outcome which is in the best interests of all relevant stakeholders. The Group believes that, in particular given current difficult capital market conditions, an acceptable proposal capable of being implemented by 15 December 2008 is unlikely to be forthcoming.
"In the absence of a recapitalisation solution in the short term, the Group’s objective therefore is to obtain longer term debt extensions from the lender groups beyond 15 December 2008 to provide a more stabilised environment for the recapitalisation process to be pursued over a longer time frame."
The failure to find a buyer willing to pay an acceptable price for Bankstown Square puts more pressure on the compa
