Centro Says It Is 'Viable'
And Not Near Default

MELBOURNE, Australia -- Centro Properties Group reassured investors that it is still viable and isn't in danger of breaching loan covenants.

Stock in the shopping-center owner rallied on the news after losing more than 85% of its value earlier this week. Shares rose 50% yesterday to A$1.21 (US$1 .04), while Centro Retail stock was 15% higher at 75 Australian cents.

On Monday, Centro cut its earnings forecast by 14%, suspended its first-half dividend and said it may have to sell properties as part of a restructure to pay back debt.

Yesterday, Centro said there isn't a clause in any of its loan covenants that would trigger a default if its market capitalization fell below a certain level. The company said the same applied to its associate Centro Retail.

Centro made the comments in response to analysts' reports Tuesday that the company "is in liquidation mode" and "could cease to be a going concern."

"Neither Centro nor any of its managed funds are in breach of any lending covenants," the company said.

Centro and its advisers, as well as the advisers of its financiers, have examined the business' cash flows and are "comfortable about the ongoing viability of the business," the company said.

It is struggling to refinance maturing debt by Feb. 15 after problems in the U.S. subprime mortgage market, which Centro previously used to rollover debt, pushed up the cost of borrowing.

Centro, which owns more than 800 properties in Australia, New Zealand and the U.S., reiterated it is examining the sale of assets, interests in managed funds and equity injections to cut its gearing.

It added that it "is not under any obligation to sell assets and would only do so selectively if necessary."

The company, a large shopping mall owner and manager in the U.S. incurred its debt after an aggressive and highly leveraged acquisition spree in the past two years.

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