Anyone still needing to be convinced that synthetic financial strife has real world consequences could look down under on Monday - to Centro Properties, the Australian shopping mall operator. A cut in its 2008 earnings forecast of 13.6 per cent caused a 76 per cent plunge in its share price - bringing Centro’s market cap down from A$4.82bn to A$1.15bn.
With A$26.6bn of property on its books, the company is having to face up to sharply higher financing costs and is already looking at selling its US acquisitions to private equity buyers, although no names were mentioned. As recently as March it paid US$6.2bn to acquire New Plan Excel Realty Trust.
Centro said it had won an extension for all of its maturing debt - but only up until February 15. Refinancing talk continuing in the meantime. Chairman Brian Healey said:
Tightened credit conditions have…had the effect that negotiation of a comprehensive refinancing package of these short-term facilities has not yet occurred.
“It has become clear that to secure longer term financing in the current illiquid credit market, Centro will need to reduce its gearing level significantly.
Last week, Merrill Lynch said that it had doubts about Centro’s business model and rating agency Standard & Poor’s put the group on credit watch, causing a temporary suspension of Centro’s shares.
