Bracewell & Giuliani LLP announced today it lead an international legal and financial advisory team representing the Senior Lenders ofAustralia-based Centro Properties Group’s (CNP) in finalizing CNP’s global restructuring efforts, widely recognized as one of the most complex and innovative restructurings in Australian history. The restructuring, finalized after four years of discussions and interim arrangements, combines a novel debt-for-equity swap with an aggregation of assets into a new real estate investment trust called Centro Retail Australia (CRF), integrating U.S.-style pre-packaged plan concepts into the existing Australian restructuring regime.
As a result of the restructuring, CRF now holds more than $4.4 billion of Australian retail properties, interests in real estate investment syndicates and an internal property management business and trades on the Australian Stock Exchange (ASX) as a new public entity. A key component of the restructuring was the conversion of the $3.2 billion in CNP debt held by the Senior Lenders into the substantial majority of the equity of new CRF, with the remaining equity being allocated among the former shareholders of Centro Retail Trust (CER) and various third party investors in the series of funds and trusts formerly owned by CNP.
“CNP’s groundbreaking approach to its restructuring is a tremendous success for all involved, demonstrating the viability of debt-for-equity swaps in Australia, the willingness of Australian courts to consider novel schemes of arrangement and the ability of the Australian restructuring system to accommodate pre-packaged restructuring transactions,” said Robert D. Flaschen, lead counsel to the Senior Lender advisory team and the head of Bracewell’s financial restructuring practice.
Bracewell was first engaged by CNP’s private placement noteholders in December 2007 when the restructuring discussions first commenced. As the restructuring progressed and much of CNP’s debt traded into new hands, the firm’s role expanded to encompass CNP’s entire international lending syndicate, consisting of more than 90 private investment funds, institutional investors and commercial banks from around the world.
While CNP’s massive size and complex corporate structure presented an enormous challenge to the restructuring efforts, the Senior Lenders’ advisory team worked with CNP’s and CER’s advisers to develop an innovative framework for a restructuring ultimately agreed upon by the many different creditor, shareholder, corporate and trust groups whose consent was required in order to consummate the restructuring on a solvent basis.
The restructuring plan included five key components:
The sale of CNP’s U.S. assets for more than $9 billion.
The aggregation of CNP’s and CER’s Australian assets into a simplified real estate investment trust (REIT).
A debt-for-equity exchange whereby the Senior Lenders cancelled all of their CNP senior debt in exchange for the substantial majority of the equity interests in the newly-formed CRF.
A $100 million consent fee, which the Senior Lenders agreed to make available for CNP’s hybrid lenders, convertible bondholders and common shareholders as an incentive to obtaining their consent to the restructuring on a solvent basis pursuant to Australian schemes of arrangement and shareholder resolutions.
A “fallback plan” that contemplated the appointment of receivers with respect to the Senior Lenders’ security interests in order to implement the restructuring in the event consents could not be obtained from all of the necessary constituencies and integrated the U.S. pre-packaged plan concept into the existing Australian restructuring regime.
“CNP’s aggregation and the debt-for-equity transaction mark the end of its restructuring, the achievement of substantial value for the Senior Lenders and the beginning of a new era for CRF as one of Australia’s largest retail property owners and managers,” noted Renée M. Dailey, who co-lead the Bracewell team.
Joining Bracewell on the Senior Lender advisory team were U.S.-based financial adviser firm Houlihan Lokey; Australian law firms Allens Arthur Robinson and Arnold Bloch Leibler; and Australian financial adviser firms Flagstaff Partners and McGrathNicol.
