conjoined centro twins

THE countdown to the separation of Centro Properties and Centro Retail Trust (CER) has begun, but there are many hurdles to overcome before it's a done deal.

Against the backdrop of having to service at least $3 billion of debt, class actions and an Australian Securities and Investments Commission investigation, CER has not yet picked its restructuring advisers.

Six groups pitched last week and there's hope a decision will be made next week.

Some bankers are said to be wary of many issues surrounding the group and many are keen to see some form of down payment before they agree to help separate the conjoined Centro twins into an Australian group and a US group.

UBS and JPMorgan (read Andrew Pridham), were the two key advisers to Centro in its heyday. Both pitched, although JPMorgan's was in concert with boutique Moelis & Company.

Citi, Merrill Lynch (with its new team fresh from UBS), Deutsche Bank and Goldman Sachs JBWere are also said to have made proposals.

Centro's downfall was its $8 billion foray into the US through its takeover of the Galileo America Shopping Centre Fund in early 2007.

These assets formed the base of CER, although they also co-own some centres with the parent company.

The centres are considered B-grade given they are anchored by discount supermarkets and specialty stores, located primarily in areas hit by the US subprime credit crisis.

While sales have been ticking over, they are not trophy assets and certainly no one in the US is lining up to buy them, despite all having been up for sale for two years.

The best bet Centro has is to unhinge the two and let CER float off to the US.

Glenn Rufrano ran CER and after the departure of Centro's founder, Andrew Scott, he came over from New York to Melbourne to help refinance the entire group.

Aside from getting the banks to roll over their debt, Rufrano has been an advocate of separating the two businesses and getting a US listing for CER.

Citi analysts think the US listing would make sense and could be done in tandem with a debt-for-equity swap or a recapitalisation via a capital raising.

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http://www.smh.com.au/business/rio-rumours-shape-as-chinese-whispers-with-vested-interest-20091125-jry3.html