Centro Properties, Australia’s second-biggest shopping mall owner, has become the latest victim of the US sub-prime mortgage fallout after defaulting on A$1.3bn (US$1.1bn) of loans, forcing the company into a “workout” with its banks. Financial Times, Daily Telegraph
A 75% plunge in the value of the group’s share price on the Australian stock market, was followed by falls in most UK property companies, with Liberty International down 5%, Minerva 10% lower and St Modwen also off 10%.
While the company has secured an extension for all of its maturing debt facilities until February, it is still negotiating the refinancing of A$1.3bn of debt.
Andrew Scott, Centro chief executive, admitted that, if the liquidity crunch worsened in February, he could not discount the possibility that the company would go bust.
Centro used heavy gearing to grow rapidly from A$9.9bn of funds under management in January 2006 to A$26.6bn today.
It has expanded into the US through the acquisition of two real estate investment trusts, Heritage and New Plan Excel Realty Trust.
New Plan was bought for A$5.8bn – alongside Centro Retail Trust, one of its funds – and is understood to include the debt that has now pushed the group into default.
Centro had hoped to refinance the debt through the US commercial mortgagebacked securities market. But this has effectively shut down in recent months with just US$6.3bn of issuance in October against a record US$38.5bn in March.