Centro Properties, financiers agree in principal to long-term refinancing, stabilization plan

By Caroline Salls

Pittsburgh, Dec. 17 - Centro Properties Group has agreed in principal with all of its financiers on a long-term refinancing and stabilization plan for the group, according to a news release.

The company said its lenders have agreed to extend its Dec. 15 loan expiration date by one month to allow Centro to complete the documentation for the refinancing and stabilization.

"The board has carefully considered all alternatives available to Centro over the last 12 months and has concluded that the transaction agreed in principle with our financiers provides the best outcome for our shareholders," Centro chairman Paul Cooper said in the release.

"The outcome provides a future for Centro and retention of some value for our existing shareholders and is superior to the prospect that Centro otherwise faced of entering administration or liquidation."

The terms of the agreement in principle include:

• A portion of Centro's A$5.05 billion of senior secured debt owed to the company's Australian lending group and U.S. private placement noteholders will be replaced with a A$1.05 billion hybrid security, and A$4.0 billion will be converted into term loans maturing on Dec. 15, 2011;

• The A$1.05 billion hybrid security will be senior secured convertible bonds subscribed for by the Australian lending group, with a seven-year maturity and the potential for conversion into ordinary stapled securities.

All interest payable on the hybrid securities is expected to be capitalized, and any conversion to ordinary stapled securities would be subject to a number of conditions, including approval of Centro ordinary securityholders;

• Centro stapled securities equivalent to 14.9% of existing issued securities will be issued by Jan. 15 to the Australian lenders and U.S. private placement noteholders at market value, and the proceeds will be used for payment of outstanding lender fees and expenses;

• If converted in full, the hybrid securities would constitute 90.1% of the post-conversion ordinary stapled securities of Centro;

• The company would obtain an up to A$35 million revolving working capital facility;

• No distributions to ordinary securityholders will be paid for the duration of the senior secured debt facility, and it is unlikely that distributions would be paid before conversion of the hybrid securities;

• A total of $1.3 billion of loans associated with Super LLC, Centro's joint venture with Centro Retail Trust, will be converted into term loans maturing on Dec. 31, 2010;

• A $370 million facility will be provided to Super LLC by the existing U.S. lenders to be used primarily for the repayment of debt and to provide additional liquidity; and

• Centro will provide collateral to the Super LLC lenders to secure the release of Centro guarantees within the Super LLC structure.

"This outcome will stabilize Centro and provide sufficient liquidity with time for the company to maximize the value of its property operating platform and funds management business," chief executive officer Glenn Rufrano said in the release.

"This transaction also provides the opportunity to pursue an alternative recapitalization strategy in a more favorable economic environment."

"The board of CER considers that the stabilization plan agreed in principle with our financiers provides a positive outcome for securityholders and significantly increases the longer-term equity value of CER's investment in Super LLC," Cooper said in a Centro Retail Trust release.

Sydney, Australia-based Centro Properties specializes in the ownership, management and development of shopping centers.

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