The death spiral of America’s second biggest shopping mall group is going to make it tougher for Australian groups, Centro and Westfield as they struggle to survive the worsening downturn in American retailing.

But now General Growth Properties (GGP) is struggling to stay solvent as credit markets lock it out of a $US1 billion refinancing and its shares tank. That’s adding to the pressure, especially on the tottering Centro.

General Growth directors warned this week that it may not be able to continue as a going concern if it can’t refinance or extend nearly $US1 billion in debt due by the end of next month.

Its shares sank 88 cents on Tuesday to just 49 US cents where it had a market cap of $US131 million. They fell further overnight, down another 28% to 35 US cents (and more in after hours trading, to 32 cents) and a market cap of $US93.9 million. GGP shares have lost over 99% of their value this year, from a high of $US51.

Centro Properties and Retail have until December 15 to produce a recovery plan for their banks, but plunging retail sales in the US and property values are making it very likely that the companies can’t be saved. They have a large collection of small and medium malls in the US, as well as in Australia.

The shares prices of Centro Properties and Centro Retail fell a third of a cent yesterday to 6.5 cents and 9.7 cents respectively on the ASX

Yesterday’s third quarter update from industry giant, Westfield the extent of the flop in retail sales at its 55 centres in the US — only leisure turnover is up in the three months to September and longer. Food, jewellery, cinemas, clothing are all doing it tough. Westfield’s US malls also have the lowest occupancy of the company’s worldwide centres at 92.8%. That’s the highest for a decade.

Now General Growth Properties is warning that the retailing slump and credit crunch have pushed the company to the brink of bankruptcy, saying in an SEC filing late Monday that it has $US900 million of property secured debt and $US58 million of corporate debt coming up for renewal by the first of next month. It also faces another $US3.07 billion in debt that matures in 2009.

The company operates more than 200 malls in 44 states. It has two big malls in Las Vegas where the slump in gaming and the subprime crisis and home foreclosures has cut a swathe through sales and general economic activity. Those two malls have been up for sale since August with no takers. If it can’t sell them, then it might be curtains for General Growth. As Centro is finding, buyers in the US are few and far between.

The buyer of a swag of Centro Properties US malls pulled out of the $US700 million deal a month or so ago and there has been no sign of any renegotiation. The post Lehman Brothers credit freeze has killed off deals like that, the retailing slump is making it worse.

This morning Lend Lease revealed it had abandoned its proposed sale of its 50% stake in the King of Prussia shopping mall in the US because of a lack of buyers. Bad luck Centro, General Growth and Macquarie DDR.

Peter Fray

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