CENTRO's hopes of a white knight were dashed yesterday after the buyer of Centro America Fund's $US714 million portfolio walked away.
This is despite Centro discounting price of the 29 assets in the 31 properties CAF portfolio by 10%.
The failed sale rocked Centro and Centro Retail Trust share price, falling 31.43% and 31.03% or down 3.3 cents and 4.5 cents to close at 7.2 cents and 10 cents, respectively.
The deal was meant to be the first in a line of several “orderly asset sales” planned by Centro to appease the banks and to gain its fifth debt extension or otherwise face paying $4 billion upfront in mid December.
The sale announced in July this year to an unnamed private real estate investment advisor would have given Centro between $250 million to $300 million, after payment of the secured debt, to make a dint out of the $17.36 billion of debt it owes.
Of the total debt owed, $8.32 billion is current and $6.80 billion is non current – Centro’s current liabilities is $5.24 billion; Centro Retail Trust owes $2.30 billion; CAF total $622 million.
More importantly, the deal was a ticket to solving Centro’s short term liquidity problems. Centro now has less than $30 million remaining from a $145 million facility to last until the end of this month.
After September 30, the $145 million facility will dry up and Centro will have no money to run its day-to-day operations.
But Centro yesterday said notwithstanding termination of the agreement, discussions between Centro and the purchaser are continuing.
There are speculations that the deal collapse because the buyer did not want to pay the price agreed.
Centro’s chief executive Glenn Rufrano fuelled that speculation last Friday after he conceded that the purchaser might re-negotiate the price.
Despite discount it already by 10%, he told analysts the group is trying to maintain the $US714 million price but he acknowledged the anonymous buyer would likely want to offer a counter price to the one agreed to in July.
Centro yesterday warned “No assurance can be given that those discussions will result in the parties entering into a further agreement for sale or as to the terms of any further agreement, if entered into.”
An analyst who did not wish to be named said it is up to the banks.
“The banks want to get their money back. They will be weighing up whether they should liquidate or wait. They want to avoid a fire sale.
“Having said that, Centro is on its fourth extension and the banks have since January waiting for them (Centro) to sell some assets and start paying off the debt,” the analyst said.
Centro has planned $6.7 billion worth of sales including the Centro Australia Wholesale Fund which owns the Centro Bankstown in Sydney, Centro Galleria and Centro Halls Head in
Earlier this month at the annual results briefing Rufrano said the sales are progressing even though many properties have recently been listed in newspapers after Centro first opened a “virtual data room” in January inviting prospective parties to bid for the assets and telling the market in mid year that expressions of interests have been received.
One research firm questioned whether there has been progress at all.
“Are there any parties still discussing options with CNP at the group level?,” JPMorgan asked earlier this month.
“At the midyear CNP noted that: data room was open; expressions of interest had been received; and that management presentations were ongoing.
“It’s difficult for CNP to update the market here, but given six months have passed we assume that any interest that might have been there has petered out,” JPMorgan concluded.
Australian Property Journal