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February 20, 2008 |
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CENTRO NP: S&P Holds CCC+ IDR Despite Parent's Debt Extension Standard & Poor's Ratings Services said that Centro NP LLC's 'CCC+' issuer credit ratings remain on CreditWatch with developing implications, where they were initially placed on Jan. 3, 2008. This follows a series of announcements made by Centro Properties Group. The 'CCC+' senior-unsecured debt and 'CCC-' preferred stock ratings on Centro NP (formerly New Plan Excel Realty Property Trust) also remain on CreditWatch with developing implications. CNP updated the Australian equity market on the company's refinancing plans for its maturing debt and progress made on the "strategic review". Collectively, the announcements do not have an immediate effect on the Centro NP ratings. The announcements were: -- Debt facilities of US$1.3 billion (A$1.4 billion) associated with CNP's U.S. joint venture with Centro Retail Trust (CER; not rated) have been extended until Sept. 30, 2008. Extension beyond April 30, 2008 is subject to similar arrangements with CNP's Australian creditors, as detailed below. Additional development funding of US$80 million (AU$90 million) has also been provided to the CNP/CER U.S. joint venture; -- CNP completed its audit of the classification of current- to-non-current debt reported at June 30, 2007. As a consequence, the proportion of current debt increased to 72% of total debt, from 30% previously. The total debt of AU$3.6 billion in these accounts was accurate; and -- CNP and CER will announce their half yearly results to Dec. 31, 2007 on Feb. 28, 2008. "These announcements do not change the near-term probability that Centro NP could be put into default by its creditors, notwithstanding that the company's operating assets remain of good quality and that the extension of the debt facilities is a positive sign," Standard & Poor's credit analyst Craig Parker said. CNP also announced that its whole-of-group review, which may include a recapitalization, equity issuance, or acquisition of CNP, and/or the sale of the group's interest in its Australian and U.S. wholesale funds, is continuing. In addition, CNP announced that its AU$2.3 billion debt facilities under the Australian extension arrangement have been extended until April 30, 2008. At the same time, CNP's U.S. private-placement noteholders, who are collectively owed US$450 million (AU$505 million), have agreed to continue to act in accordance with an extension arrangement similar to the Australian extension arrangements. Mr. Parker added: "Given the uncertainty facing the group, we believe that the issuer rating could move either up or down from 'CCC+'. A further downgrade would be precipitated by Centro NP not being able to seek a further extension of its debt facility beyond April 30, 2008. There is also a prospect that some lenders within the CNP group may selectively rollover facilities that have recourse to favorable assets, while other lenders may seek repayment on April 30, 2008. The complex ownership structure of CNP and the different legal jurisdictions of Australia and the U.S. will figure in the bankers' decision process." "On the other hand, the ratings could be raised if CNP and Centro NP are able to implement a strategic plan that satisfies the bank lenders and private-placement noteholders and places the companies on a more sound financial footing. The reduction of outstanding debt levels is a critical factor. At the same time, the group has to manage the assets to retain their market value; this will signal to Standard & Poor's that Centro's credit quality has improved. The cash-flow impact of the increased interest margins on CNP's debt facilities (as agreed in mid-December 2007) and the reduced likelihood that the business model will continue in its current form following this renegotiation process mean that any ratings upgrade may be limited to the low 'BB' category." About Centro NP Centro NP LLC, headquartered in New York City, owns and operates 465 community and neighborhood shopping centers in 38 states. The company had assets of US$6.3 billion and equity of US$3.8 billion at Sept. 30, 2007. Centro Properties Group, headquartered in Melbourne, Victoria, Australia, is an Australian Listed Property Trust that specializes in the ownership, management and development of retail shopping centers in Australia, New Zealand and the USA with AU$26.6 billion in assets under management. |
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