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Change at the Top

With a Feb. 15 deadline to pay off or refinance $3.5 billion in short-term debt exactly one month away, embroiled Australian listed property trust Centro Properties Group made a sudden change at the top. CEO Andrew Scott stepped aside in mid-January and was immediately replaced by Glenn J. Rufrano, Centro's CEO of U.S. operations and former CEO of New York-based REIT New Plan — the firm Centro acquired back in February 2007 for $6.2 billion in a deal that saddled Centro with some of the debt it's struggling to pay off.

The move came in the middle of Centro negotiating with lenders including BNP Paribas, the Royal Bank of Scotland and JP Morgan Chase, among others, and accepting acquisition bids from prospective suitors. Scott had been handling the sale, but the duties will now fall to Rufrano. Analysts that cover Centro say the move is meant to be an olive branch for Centro's lenders, many of whom were frustrated with Scott.

Some lenders have also been banging heads with Centro over how much the company actually owes. Earlier that same week, one of Centro's creditors claimed it had defaulted on $450 million of private paper placements in the U.S., thereby increasing its outstanding debt. Centro has refuted the claim.

“The removal of the former CEO gives the lenders some comfort that some level of dispassionate analysis will be brought to the table as [they] work with the new CEO,” wrote Citi analyst Peter Cashmore, in a research note.

With Scott out of the picture, Centro must feel that lenders will be more willing to give in, notes Cashmore. In addition, according to Rich Moore, an analyst with RBC Capital Markets, Rufrano's familiarity with the U.S. real estate market is seen as an added incentive. If Centro fails to sort out its financing problems and can't get a buyer willing to take it wholesale, Rufrano will try to sell the U.S. assets piecemeal. Centro declined to comment.

Facing serious challenges in refinancing the billions of dollars in debt it took on to fund acquisitions in the U.S. and Australia, Centro put itself up for sale in early January. Since then, Centro says, it has received interest from several potential buyers, including the Westfield Group, the Blackstone Group and Morgan Stanley.

Centro's options include the sale of its more than 700 U.S. assets. However, given the current market environment, that could take as long as eight months, Moore says.

Scott, who has headed Centro Properties Group since 2005, will get a $3 million severance package and offer his consultative services until March 31. Rufrano will receive an annual salary of $1.2 million and a potential short-term incentive of up to 150 percent of his salary.

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