Centro Properties Group and its listed spin-off, Centro Retail Group, have completed the $9.4 billion sale of their US asset to private equity company Blackstone.
In a statement to the ASX yesterday Centro said net proceeds of "approximately US$650 million will flow to Centro from the sale, and these proceeds will facilitate the repayment of some of Centro’s headstock debt".
Mr Robert Tsenin, Group Chief Executive Officer, said, “The US assets and services business sale was a critical first milestone in Centro’s restructuring process and puts Centro in the best position to now proceed with its Australian restructuring, which, if successful, is the only realistic opportunity for Centro securityholders to retrieve any value from their investment”.
Centro said it will retain ownership in seven US properties as certain closing lender consents and approvals were not obtained prior to closing.
"Blackstone has agreed to manage these for an interim period following closing.
"The carrying value of those seven US properties is nil and they are subject to tax indemnities as previously disclosed in the contingent liabilities note of Centro’s financial statements.
"Centro continues to progress its previously announced restructure initiatives in the best interests of investors."
Central Retail said in its statement:
"The completion of the sale is a significant further step for CER in its restructure and significantly simplifies its business model by becoming an Australian-only REIT with a high quality investment portfolio.
“The sale to Blackstone represented a compelling outcome for CER and, in light of the significant US debt maturing in December 2011 and the benefit that the proceeds provide in dealing with CER’s upcoming Australian debt maturities, was in the best interests of CER securityholders.”
The net proceeds after transaction costs to CER from this sale are approximately US$514 million. US$480 million of these proceeds, reflecting the net proceeds to be received directly by CER from its US investments, after transaction costs and settlement of CER’s remaining USD interest rate swap, are hedged at an exchange rate of approximately AUD/USD 1.03.
"The remaining proceeds, which CER will receive indirectly via its US syndicate investments, will be converted at the then prevailing AUD/USD spot rate and are expected to be received over the coming weeks.
"These proceeds are intended to be utilised largely to retire a significant portion of CER’s maturing 2011 Australian debt facilities. As a result of these debt repayments, CER’s gearing will reduce to approximately 43%, positioning CER well to deal with the remaining Australian debt maturities in late calendar year 2011.
"CER continues to progress the previously announced aggregation discussions with Centro Properties Group and a number of its managed funds," Mr Day said.
Under the plans so far detailed, Centro Properties swaps its remaining property assets in return for the cancellation of debt that totalled $3.1 billion at the end of last year (but will be lower after the money raised from the Blackstone deal), and then merges with a group of associates including its 50%-owned listed affiliate, Centro Retail, and unlisted funds including Centro Australia Wholesale Fund (CAWF) and Direct Property Fund (DPF).
The real estate investment trust that emerges will be more than half-owned by Centro’s current lenders, mostly hedge funds that bought the debt from banks at a discount.
As part of that plan, $100 million will be set aside for payments to junior creditors including corporate bondholders, owners of Centro hybrid securities, security holders and class-action payments.
Security holders in Centro Properties are expected to be only offered a few cents per security for consenting to the restructure. But they and Centro Retail security holders will vote on the restructure.
Centro Properties Securities closed at 3.9c yesterday, up 0.1 of a cent. Centro Retail securities were unchanged at 33.5c, which tells you where the winners are in this very complicated restructure and death defying deal.
No wonder 5% of Centro Retail was traded on Monday.
