Centro Quits Hedging its Interest Rate Bets

There were new developments at the end of this week for Centro, the credit-squeezed owner of retail properties in the United States and the Antipodes. According to statements the company made to the Australian Securities Exchange earlier today, Centro can no longer extend its interest rate hedges. “As a result,” the statement said, “Centro’s current interest rate hedging is now below historical levels. This has increased Centro’s exposure to interest rate movements, and could translate into volatility in Centro’s earnings if interest rates rise or fall significantly.” The company noted that about half of its Australian-dollar debt and about 40 percent of its U.S.-dollar debt is fixed, with rates between 5.63 percent and 4.73 percent, respectively. According to the Melbourne Herald Sun, Bank of America, one of Centro’s main creditors, has already increased the rate on a $350 million non-fixed rate loan to Centro NP, the company’s U.S. fund. Also late in the day on Friday (in Australia), Centro told the ASX that its CFO, Romano Nenna, has taken “an extended leave for health reasons from the company.” Ivan St Clair, a partner with Ernst & Young, has been named acting CFO.