Centro to launch trust to avoid collapse

If it receives regulatory approval, the trust will be controlled by a group of 90 hedge funds - Centro's secured creditors - and would be comprised of Centro Properties and its 50%-owned subsidiary Centro Retail, whose balance sheet is considered far healthier than the properties unit, The Sydney Morning Herald reported. The trust is poised to own or manage A$7 billion of shopping mall assets across Australia, The Australian added.

The move to create the trust is a bid by Centro's backers to eliminate A$2.9 billion of debt that will reach maturation on December 15. Bloomberg, citing a statement by Centro, noted that the group's higher-ranking senior lenders will be given 72.3% control of the trust in exchange for the billions of debt due next month, while Centro Retail shareholders will own 15.9%.

Investors in the Centro Direct Property Fund International - an unlisted property trust predominantly investing in Centro international property funds - will own 11.8%.

Centro Properties Group investors will be paid A$0.0503 a share to fully exit their investment in the group. These shares were said to be worth A$10 at one point in the company's history. At the height of its success, Centro owned A$27 billion worth of assets in Australia, New Zealand and the US.

The debt that the group is now grappling with was accrued after Centro's A$9 billion investment in an array of U.S. properties, made between 2006 and 2007, turned problematic at the onset of the subprime mortgage crisis. These assets were offloaded to The Blackstone Group earlier this year for $9.4 billion. That deal, which saw Blackstone acquire 588 assets, is the largest global private equity transaction since the onset of the financial crisis.

Prior to the closure of the Blackstone deal, Centro revealed that its entire portfolio, including its 112 shopping mall properties in Australia and New Zealand, totaled A$16.5 billion, but was saddled with A$16 billion in debt.

The Centro deal is also considered Blackstone's biggest transaction since acquiring the Hilton Hotel Corp. franchise in July 2007, for $26 billion.

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• Topics
• Australasia
• Real estate
• Credit/Special Situations
• The Blackstone Group
• Australia
• Real estate
• Distressed