CENTRO Properties Group chief executive officer Glenn Rufrano ruled out a fire sale of assets as he seeks to persuade banks to refinance A$3.9 billion (US$3.4 billion) owed by the Australian owner of 700 US malls.
"We are not anticipating selling assets," Rufrano said in Melbourne yesterday in his first press conference since taking over on January 15. Centro rose 35 percent in Sydney, the most since December 19.
According to Bloomberg News, Rufrano, 58, must persuade investors and creditors to let Centro retain a collection of malls that stretches from Perth, Western Australia to Yonkers, New York.
Centro has lost A$4.5 billion of its market value since the company said on December 17 it was struggling to refinance debt. Centro borrowed under former CEO Andrew Scott to buy US$9 billion of malls over two years.
"Centro is still a highly risky investment because there is a lot of debt and very little equity - it's a guess what can happen and that's up to the debt holders," said Justin Blaess, who manages about A$2 billion in property stocks at ING Investment Management in Sydney.
"Centro is too speculative for us and is off our radar until the company passes a few milestones and shows how they are going to reduce leverage."
Centro surged 12.5 Australian cents to 48 cents at the Sydney close of the Australian Stock Exchange. The stock has dropped 92 percent since December 17.
Rufrano said he was asked by Centro's board to take over on January 12, the same day he was celebrating his 35th wedding anniversary, and has signed a one-year contract. He will return to Australia with his wife in February.
Rufrano will travel to the US on January 26 to meet banks and bondholders. About two-thirds of Centro's A$26.6 billion of assets under management are in the US, where shopping mall rents could decline as the country slips toward a recession.
"Centro's business is within a climate in the US which is certainly going south; there certainly may be lower rents and higher vacancies," Rufrano said yesterday.
US retail sales in January will likely rise at the slowest pace since April, the International Council of Shopping Centers said on Wednesday.
"We don't have an issue with the banks; the relationship with stakeholders is good," Rufrano said. "The problem we have is a balance sheet issue and the banks care about us being the custodians of their collateral."
Rufrano said the company can't sell bonds in the current credit squeeze and that Centro has been left with a credibility problem.
Potential suitors for Centro and its funds can access a data room on the businesses from January 29, a week later than originally planned. More information on Centro's properties and performance of the markets they operate in will be released in the middle of February, Rufrano said.
Centro's eight most profitable shopping centers are in Australia, where retail sales increased for a sixth month in November, spurred by unemployment at a three-decade low as the economy enters its 17th year of growth.
Cash flow from malls including Centro Galleria in Perth and Centro Bankstown in Sydney can keep the company afloat if it succeeds in refinancing debt by the February 15 deadline imposed by bankers, said John Snowden from Colonial First State, Centro's biggest shareholder.
"Their assets are good quality and are performing well; we are very focused on cash flow, which we see as a starting point to determine where relative value lies," said Snowden, who manages the equivalent of US$6.9 billion as head of property securities at Sydney-based Colonial.
"Glenn Rufrano is regarded as a shrewd and capable manager."
Colonial First State has retained its 8.3 percent stake in Centro, which comprises less than two percent of Snowden's portfolio.