This article is from the Australian Property Journal archive
Centro has made an agreement with 73% of the senior lender group to extinguish all of Centro’s senior debt, in exchange for all of its Australia assets.
The deal involves Centro’s $3.1 billion headstock debt in exchange for its direct holdings and interests in the Australian shopping centres, which it co-owns with various MCS syndicates and Centro Retail Trust (CER), worth a total $7.3 billion.
In addition, the senior lending group will also make available $100 million to be distributed to stakeholders, which includes general creditors; investors involved in the class action who are claiming in excess of $200 million; bond holders and other shareholders.
However it is too early to tell who gets how much, Centro chairman Paul Cooper said the board will have to sit down and work out an appropriate scheme to divide the $100 million equally amongst the stakeholders.
Lawyers for the class action, Maurice Blackburn senior associate Martin Hyde told Australian Property Journal that at this stage the firm is watching the events unfold.
The class action is against Centro and CER, but Hyde said the largest claim is against CER and not Centro.
“We represent some of the largest institutions in this class action which amounts to hundreds of millions of dollars.
“At this stage the details are very skeletal and we are watching the events unfold, but we will make necessary steps to protect the interests of the class action investors,” he added.
Cooper said the headstock agreement is a win-win situation for shareholders, who had a negative equity of $1.6 billion as at December 31.
The Centro Board of Directors believe this amount is the best outcome that can be achieved for stakeholders in the circumstances having regard to Centro’s negative net asset position, and following extensive and prolonged negotiations with the Senior Lender Group.
“We have previously said that the capital structure of Centro is unsustainable in its current form. The Headstock Debt Restructure, if approved, will return Centro to a positive equity position and potentially allow Centro to return some value to its stakeholders,” he added.
The restructure will end Centro’s journey as listed property group. Founded by former Coles property director Andrew Scott, and listing in 1997, at the peak Centro had a market capitalisation of $16 billion with $26.6 billion of assets under management.
Centro will be ultimately owned by senior lenders, and has entered into discussions with Centro Retail Trust (CER) and Centro Australia Wholesale Fund (CAWF) and the Direct Property Fund (DPF) to simply the structure by consolidating all their assets into a listed property trust.
Investors in CER, CAWF and DPF will have a share in the new fund but Centro investors will not get the same opportunity.
Centro CEO Robert Tsening said the headstock lenders will hold upward of 50% interest in the new trust.
Centro and CER also announced that Blackstone Real Estate Partners has bought all the US assets for $US9.4 billion, including the US real estate assets acquired at a 1.3% discount to December 31 book values.
Tsening said there are no plans to sell the MCS syndicates business anymore and the Australian assets were more attractive to keep, so the group sold the US properties.
“We didn’t have a hope in the recapitalisation of the US portfolio,” he admitted.
“We like the MCS business” he added.
The US sale will generate proceeds for Centro, Centro Retail Trust and its other managed funds of $US1.38 billion. Proceeds that will flow to Centro from its direct US property investments and equity investments in managed funds likely to be wound-up as a result of the US sale, are anticipated to be approximately $US600 million, facilitating the repayment of debt.
As at December 31 Centro had net tangible assets attributable to members of negative $2.43. The 1.3% discount plus transaction costs will result in a reduction in net tangible assets attributable to members of $0.08 per security. As a result, net tangible assets moved to negative $2.51.
Centro shares traded 2 cents lower at 13 cents yesterday, whilst CER shares increased 1 cent to 36 cents.
Australian Property Journal
