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cer shares jump 55pc despite 260m loss...

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    Centro Retail shares jump 55% despite $260m loss
    28/02/2008 By: Niraj Shah

    Centro Retail Group (CER), a property trust managed by Centro Properties Group (CNP), said it posted a half-year net loss of $260.8 million. Notwithstanding the loss, the company's shares jumped 58% after it distinguished its funding troubles from the strong underlying performance of its portfolio.

    Centro, one of Australia's highest profit credit crisis casualties, attributed the loss to reduction is US retail property values and adverse derivative movements. The company had posted a $41.9 million profit in the prior corresponding period.

    The Melbourne-based real estate investment trust's first-half sales rose 34% to $66.2 million, from $49.2 million a year earlier, while operating distributable profit for the half year was $105.1 million, or 6.69c per security, an increase of 6.2% from a year earlier

    The company said the increase in operating distributable profit was primarily due to the acquisition of New Plan and the merger of CER and Centro Shopping America Trust, which was formerly Galileo Shopping America Trust.

    The result has also been underpinned by high occupancy rates and solid increases in rental income across CER's portfolio of retail properties in Australasia and the US, the company said.

    The company said the strong underlying performance of the portfolio could also be attributed to the defensive nature of CER's properties, which are diversified by retailer, geography and format.

    CER's shopping centres are dominated by non-discretionary retailers such as supermarkets making it more resilient to economic fluctuations, the company added.

    Chief executive officer Glenn Rufrano said that he was encouraged by the property performance.

    CER derives income primarily from its quality retail property investments and holds high quality retail assets in both Australasia and the United States, said Mr Rufrano.

    The current financial challenges faced by both Centro Retail Trust and Centro Properties Group at a corporate level are completely removed from the operational performance of the business. CER's challenge is to solve the recapitalisation of Super LLC.

    The company said it wouldn't pay an interim distribution, compared with 6.3c a year ago.

    As previously announced by the board of CER, the trust will not declare a distribution for the six months ended 31 December 2007 at least until the short term liquidity issues surrounding its investment in Super LLC are solved, Centro said.

    While I acknowledge it must be disappointing for CER shareholders not to receive a distribution for this half, our immediate priority is to stabilise the trust's financial position in the long term interests of all our stakeholders.

    Earlier in the year, CER appointed corporate adviser Rothschild, legal adviser Gadens and accounting advisers Pitcher Partners to provide independent counsel during CER's business review.

    Centro said the focus of its business review includes seeking financing solutions for CER's short term debt commitments and considering longer term recapitalisation options for Super LLC.

    So far, CER has achieved an extension on short term debt commitments from its US Financiers until 30 September 2008. Although no Australian banks are involved in the CER extension, there are cross default provisions with the Australian banking group.

    The company said there were no additional interest rate increases or fees associated with this extension over and above those negotiated on December 17, 2007 for the original extension.

    Super LLC, the joint venture between CER, Centro and Centro MCS 40, has an investment in 538 properties, of which CER has an interest in only 161.

    Under the terms of the joint venture, each of the partners are effectively only responsible for the unsecured debt of Super LLC to the extent of their equity.

    Centro said that should there be a default of the members of Super LLC, CER might be liable for the unsecured debt of its partners, but only to the extent of CER's US$1.2 billion investment in Super LLC.

    Importantly, CER's obligation does not extend beyond Super LLC, the company said.

    At 1111 AEDT, Centro Retail Group securities had rocketed 18.5c, or 58.7% to 50c.


    Cheers, Pie :-)
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