* Klepierre executive says covenant risks under control
* "No risk" of breach at end-2008 revaluation point
* Confident can boost balance sheet via 1 bln euro sales
* Firm committed to 25% of 4 bln euro development pipeline
By Sinead Cruise
LONDON, Jan 12 (Reuters) - French property company Klepierre stayed within the terms of its debt covenants in 2008 and will rebuild its balance sheet with a 1 billion euro ($1.34 billion) assets sale programme this year.
"We don't consider that we are at any risk of breach of covenants on ratios calculated at the end of the year (2008)," executive board member Jean-Michel Gault told Reuters in a telephone interview on Monday.
"I have already insight into the value of the portfolio at end-December, I know my amount of debt, and I can tell you there is no risk we will breach our covenant at this date," he said.
Klepierre has made progress on a plan to bring its loan-to-value ratio well below a 52 percent limit, Gault said.
Also, a renaissance in investor interest and stable rental growth prospects made him "cautiously confident" Klepierre's plan to sell assets would see it regain balance sheet strength sacrificed last July to buy Scandinavian rival Steen & Strom.
Last week, credit analysts at JPMorgan said the 2.7 billion euro deal, which Klepierre struck in joint venture with Dutch pension fund ABP, had placed an unnecessary burden on company finances at a vulnerable time in the property market cycle.
But Gault said Klepierre -- which owns 12 billion euros of real estate -- had no regrets about the acquisition and had already managed to sell off some assets at prices in line or above book value, despite a sharp decline in demand for real estate investment.
"We made 140 million euros of disposals in 2008. We will obviously try to do much more in 2009, but after Lehman Brothers collapsed, the market ... virtually closed," he said.
"That is not the case now because there are some institutional investors that are not financed by debt... and due to the lack of visibility on shares, they are still keen to invest in the types of assets owned by Klepierre, such as Paris offices or European retail," he said.
Some analysts have expressed concerns that proceeds from Klepierre's sales programme could be eaten up by an ambitious and financially demanding 4 billion euro development pipeline but Gault said it was only committed to a quarter of this.
"In terms of cash, there is no issue for Klepierre. We don't need new financing, at least for this year, and we have almost no debt redemption due in 2009," he said.
"We have a valuable cash and credit line of more than 400 million euros and a free cash flow of more than 170 million euros per year after dividend payment. Even with no disposals in 2009, we have the cash to finance almost all what is committed."
While British commercial real estate values have nosedived an average 36 percent since a market peak in summer 2007, a property prices in France have only recently started to fall.
Although he expected to see some widening in French property yields in 2009, Gault said continued rental growth should cushion many French property investors from the degree of asset value readjustment suffered by British investors.
"We do not consider the French property market to be so much at risk. Even if you face an increase in yield, if you can increase the cash flow of the property, you can offset a fall in the valuation of the asset," he said.
"We are still helped by good indexation, and this will help to increase rents," said Gault, adding Spanish and French retail rents up for renegotiation at the end of a tenancy contract could grow, on a like-for-like basis, by as much as 5 percent and 15 percent respectively this year. (See www.reutersrealestate.com for the global service for real estate professionals from Reuters)