The Melbourne suburb of Glen Waverley, home of Centro Properties and The Glen shopping centre, has today assumed a prominent role in the global credit crunch when a series of shock announcements caused the destruction of $5 billion in largely Australian savings in one morning.
Forget about RAMS and the loss of a piddling $600 million, in terms of value destruction we’ve never before seen the level of damage inflicted by the following four stock exchange announcements from the Centro group, Australia’s second biggest shopping centre owner with $26.6 billion under management:
- Two page summary from parent company, Centro Properties Group, outlining inability to roll over debt
- 21-page presentation laying out the full horror
- One page statement from listed Centro Retail Trust cancelling distributions
- One page statement from Centro Diversified Funds suspending withdrawals
Make no mistake about it, this is the biggest crisis to ever hit Australia’s funds management and property industries. If our second biggest shopping centre company can’t survive, is anyone safe?
In one morning, the Centro Group has revealed that it has been unable to roll over $3.9 billion in short term loans that expire on February 15, 2008. There’s an additional $3.4 billion that falls due within 12 months and the remaining $10.6 billion expires some time after that.
So, what’s the solution? A complete review of everything, fire sale of assets, suspension of redemptions and abandonment of distributions. Heaven forbid. No wonder shares in Centro Properties Group collapsed today. The stock last traded before Thursday’s suspension at $5.70, capitalising the group at $4.817 billion.
Today they hit a low of $1.545 – a fall of 73% – and by midday they had only recovered to $1.95, still a fall of 65.8% which has seen $3.2 billion in value destroyed.
But it gets far worse. Units in the flagship Centro Retail Trust finished on Thursday at $1.42, valuing it at $3.26 billion. Today they hit a low of 58.5c and by midday were at 60.5c – a fall of 57.4% which reduced its market capitalisation by $1.87 billion.
All up, that is a cool $5 billion of equity destroyed in one morning. And who are the major shareholders involved? Millions of Australian through our major funds which are controlled by different divisions of the same big banks which are refusing to roll over Centro’s loans.
The largest shareholders in Centro Properties Group are: ING 8%, CBA 6.42%, Deutsche Bank 5.8%, Barclays 5.14%.
The largest shareholders in Centro Retail Trust are: CBA 12.95%, Barclays 9.32%, Macquarie Group 5.76%, UBS Nominees 5.09%, AMP 5.03%.
They have all taken a huge hair cut. There is no way Centro can recover from the crisis of confidence that will flow from borrowing too much money to become the fifth biggest shopping centre owner in the US.
Centro will be bought by someone like Westfield or Macquarie Bank because the credibility of managing director Andrew Scott, the former property boss at Coles Myer, is now shot. His own $30 million shareholding amassed over the past decade has also been decimated.
Check out today’s full edition of The Mayne Report, including claims the chairman of the Commonwealth Bank may have scored a $77 million windfall.
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