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this could hurt the banks on monday

  1. 5,316 Posts.
    Centro sinks $1.5bn deeper in debt
    Miriam Steffens, Sydney
    February 18, 2008

    CENTRO Properties Group has admitted its debt situation is more precarious than previously revealed, with current liabilities about $1.5 billion higher than stated in its accounts.

    The embattled shopping centre owner disclosed the accounting mistake on Friday night when it confirmed it had won a last-minute reprieve from its lenders to refinance debt due that day.

    The board has suspended its 40.6¢ per share distribution forecast for the year until it finds a way out of the crisis.

    The additional current debt comes on top of $1.1 billion disclosed when Centro corrected its preliminary 2007 accounts in September. It means the company will have to renegotiate or repay close to three quarters of its $3.6 billion total debt within the next 12 months.

    Centro has so far refinanced about $209 million of the additional $1.5 billion in short-term debt, and said it was "continuing its review of the circumstances surrounding the original classification" of its liabilities.

    The latest announcement provides fresh ammunition to possible class action suits by disgruntled shareholders, who have seen the value of their investments decimated over the past two months.

    Centro's shares have plummeted 89% since mid-December when the company revealed it was caught out by the global debt market crunch, and was struggling to refinance $3.9 billion in short-term debt after its massive US expansion.

    The stock is expected to start trading again today after shares were suspended at 61¢ on Friday pending the outcome of negotiations with Centro's Australian and US lenders, including ANZ, Commonwealth Bank and JP Morgan. Talks dragged on until late Friday as one of its main lenders held out for better terms. The company ultimately secured an extension for about $US1.3 billion ($1.4 billion) in debt for its US business until September 30, plus $US80 million in additional funding.

    The Australian lenders have granted a lifeline until April 30 for $2.3 billion in debt.

    Centro expects the Australian banks may also come around to extending their facilities through to September, but they have kept their options open to monitor the progress of its reorganisation. Bond holders in the US have agreed to hold off alongside the Australian banks.

    Centro is looking to sell its interests in its unlisted Australian and US shopping centre funds or find a cornerstone investor for the whole company.

    Glenn Rufrano, who took charge last month after the ousting of the former boss, Andrew Scott, said the extension would give Centro "sufficient time" to work out its options. "The strategic review is progressing well with a significant number of parties interested in pursuing a recapitalisation of the group," he said.

    Centro's listed spin-off, Centro Retail Trust, has also had to rack up its current debt figure, saying $598 million of its $1.4 billion in debt would have to be reclassified as due in the next 12 months.

    Centro Retail has also suspended its dividend guidance for the year.
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