THE Centro Properties Group, the Australian owner of 700 US shopping malls, announced its Chief Executive Officer Andrew Scott has resigned and has asked lenders to extend a February 15 deadline to refinance A$3.9 billion (US$3.5 billion) of debt.
Glenn Rufrano, 57 and the head of Centro's US business, will replace Scott, the Melbourne-based company said yesterday in a statement. Centro fell 30 percent to a record in Sydney trading, valuing the company at A$502 million.
Centro's market value has dropped A$4.3 billion since December 17, when the company said it was struggling to pay debt that ballooned with the US$5.2 billion purchase of New Plan Excel Realty Trust. Rufrano ran New Plan for seven years before the April takeover, which made Centro the fifth-biggest mall owner in the US and swelled debt to 44 percent of its total assets.
"It's still the same issue as before, the company needs new capital to survive," said Jason Teh, who helps manage the equivalent of about US$5.3 billion at Investors Mutual in Sydney. He doesn't own any Centro Properties shares. "The market is saying that the buyer for any of the assets will pay a much lower price than what's on Centro's books."
Stock in Centro tumbled 26 Australian cents to 60 cents as of the 4:10pm Sydney close on the Australian Stock Exchange, an 89 percent drop since the December 17 announcement. The shares peaked at A$10.02 on May 7. Centro Retail Group, a unit of Centro Properties, slid 44 percent to 32.5 Australian cents.
"Circumstances have placed Centro in a difficult position from which I believe it will recover," Scott, 54, said yesterday. Scott will receive a payout of as much as A$3 million, Centro said.
US and Australian banks are considering a request to extend the February 15 deadline, as are investors who bought US$450 million of Centro debt in US private placements, Centro said yesterday. Those noteholders on January 11 told the company they were concerned Centro may be in default on at least some of that debt, according to a statement yesterday from Centro.
Centro must agree on debt refinancing terms with its lenders the Commonwealth Bank of Australia, the Australia & New Zealand Banking Group Ltd, the National Australia Bank Ltd, JPMorgan Chase & Co, the Royal Bank of Scotland Group Plc and BNP Paribas by February 15. Lazard Carnegie Wylie is advising Centro.
National Australia, Commonwealth and ANZ, Australia's three biggest banks, are owed a combined A$3.5 billion by Centro, The Australian newspaper reported on January 11.
The US accounts for 65 percent of Centro's A$26.6 billion of assets under management after Scott oversaw US$9 billion of acquisitions in the world's biggest economy, including New Plan, the biggest US acquisition by an Australian-based real estate investment trust.
That left the company vulnerable when the subprime mortgage market collapsed, forcing banks to write down some US$100 billion worldwide and driving up borrowing costs.
Buying New Plan added properties such as the 1.1 million square-foot Independence Mall in Wilmington, North Carolina, and Grants Mill Station, a 227,000 square-foot center in Irondale, Alabama, a town of 10,000 people.
"They really do need someone who is familiar with the US property market," said John Snowden, head of property securities in Sydney at Colonial First State, Centro's largest shareholder. Rufrano was "very capable" when he ran New Excel, Snowden said.