DFO gets bailout agreement, but business up for sale

The South Wharf DFO shopping centre in Melbourne will avoid being placed into receivership after the banking syndicate of its parent company Austexx agreed to a plan to refinance the group’s $1 billion debt.

The South Wharf DFO, which is mired in $450 million in debt, appeared almost certain to be placed in receivership after Austexx’s banking syndicate – which includes NAB and Suncorp Metway – grew increasingly concerned about the centre’s poor performance.

As Austexx has used other DFO centres as collateral over the South Wharf project, there were fears the entire group could also fall over.

But the latest deal will allow Austexx to finish off the South Wharf complex (which still needs a cinema complex and food court) before Austexx tries to sell off its portfolio of assets, which includes a total of eight DFO centres along the eastern seaboard and three homemaker centres.

”We are pleased that all banks, partners and directors have unanimously endorsed the senior management of Frank De Rango and I, and the strategy we have been on for six months to recapitalise these great assets,” Austexx chief executive Geoff Porz said in a statement to Fairfax.

However, it is believed that corporate recovery experts KordaMentha, which has been involved in the recapitalisation talks on behalf of the banking syndicate, may continue to advise Austexx as it seeks to sell off its assets.

The deal should provide some relief for Austexx shareholders, including ACCC chair Graeme Samuel and Melbourne entrepreneurs David Goldberger and David Wielend.

However, it remains to be seen what impact the drama will have on the value of their investments.

While Austexx’s DFO portfolio had been valued as high as $1.5 billion, the problems at South Wharf and the generally weak retail environment is certain to bring down the eventual price.

Reports suggest the talks to reach the bailout agreement included up to 35 people, including representatives of the banks, Austexx’s management, Austexx’s directors (including Goldberger and Wieland) and representatives of the blind trust through which Samuel manages his investment.

Earlier this week, Samuel said he was “most distressed” about the problems at Austexx and the impact it would have on the fortune he could leave his children and grand-children.

He told The Australian this morning that while he was not concerned for his own financial wellbeing, his remains disappointed for his family that his nest egg has been eroded.

“They will just have to work harder themselves – and so will I to try to build it up again,” he says.

“That’s not so terrible.”