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Bracewell Leads International Team in Groundbreaking Restructuring of Centro Properties

December 20, 2011

Australia-based Centro Properties is one of the world's largest shopping center/mall developers and operators. Bracewell's clients are the participants in the "Senior Lender Group," comprised of almost 90 distressed debt investors, international banks and institutional investors owed in excess of $3 billion. An interim round of the restructuring in January 2009 resulted in a long-term forbearance agreement and the consensual subordination of a portion of the original senior debt in order to improve Centro's capital structure, features that have already made Centro a template for subsequent Australian restructuring transactions. Earlier, the Senior Lender Group was pivotal in negotiating a sale of Centro's US operations for more than $9 billion. 

The restructuring discussions begun in 2007 finally culminated in a comprehensive restructuring approved the Australian courts. The precedent-setting structure included property consolidations, "stapled" securities, numerous layers of debt and equity, shareholder litigation and a debt-for-equity exchange that resulted in Bracewell's clients becoming the majority owners of a new Australian REIT. 

This representation presented a number of unique legal challenges. As a preliminary matter, Centro’s corporate structure was described by all of the participants involved as the "most incredibly complex corporate structure" they had ever seen. The entire structure needed to be addressed as part of the restructuring, which one banker described as "attempting to assemble a 747 in mid-air." Two intermediary property owning entities were also only partially owned by Centro and, in turn, only partially owned key asset-subsidiaries and trusts both in Australia and the US. The consent of all of the constituencies – Centro's Senior Lenders, Centro's "exchangeable," "hybrid" and common stock securities, each partial subsidiary involved, each trust involved, and all of the third-party subsidiary investors and property-level lenders -- was necessary in order to consummate the restructuring via groundbreaking and inter-conditional Australian schemes of arrangement, shareholder resolutions and inter-connected subsidiary and trust restructurings.