Centro Properties, the Australian property company, has agreed a massive debt for equity swap with its lenders after it failed to refinance A$5.05bn (£2.2bn) of debt.
The company, which owns shopping centres in Australia and the US, said today, it aimed to strike a deal with its lenders in order to survive.
The plan includes A$1.05bn (£463m) of the debt being ‘replaced by a hybrid security’ and $4bn (£1.8bn) of debt being ‘converted into term debt loans’.
The hybrid security will be issued in the form of ‘senior-secured convertible bonds’, which will have seven year life-spans, and there will be an option to convert the bonds into ordinary shares in the company. If converted, these would account for 90.1% of the of shares in the company.
Chairman Paul Cooper said: ‘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.’
‘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.’
CEO Glenn Rufrano said: ‘This outcome will stabilise Centro and provide sufficient liquidity with time for the company to maximise the value of its property operating platform and funds management business. This transaction also provides the opportunity to pursue an alternative recapitalisation strategy in a more favourable economic envrironment.’
Centro was one of the early sufferers of the credit crunch having aggressively expanded its business from Australia into the US beforehand.