City Pacific extends debt deadline

Financial services group City Pacific has received an extension for the repayment of the City Pacific First Mortgage Fund’s (FMF) finance facility.

There was a rapid decline in the company’s share price in March this year amid reports that the FMF might struggle to repay its $240 million debt within three months.

City Pacific (the responsible entity and manager of the FMF) has negotiated an extension for the date of repayment of the FMF’s banking facilities to July 31, 2008. The FMF’s debt to bankers is currently $180 million, reduced from $240 million three months ago.

A statement by City Pacific to the Australian Securities Exchange (ASX) said the FMF has a number of loans scheduled for repayment during June, while City Pacific’s corporate facility of $100 million is also due to be repaid in October 2008.

City Pacific said payments will be made through the sale of certain assets held by the group, but there are concerns that the sale of some assets may be under threat. City Pacific is currently in discussions with North Queensland property development company CEC Group about a potential development in Townsville.

City Pacific stated that “the directors [of City Pacific] have not received formal notice from CEC that the sale of the future development area will not proceed”. But despite this, City Pacific said it is negotiating alternative sale arrangements should the CEC transaction not proceed.

CEC Group reported to the ASX today that its debt facility has been extended for a five-month period. CEC has been hit hard by the collapse of the US sub-prime mortgage market and its subsequent impact on property and finance markets in Australia, and is also planning for asset sales in 2008-09 to reduce debt obligations.