the situation so far., page-34

Tweety,

When the announcement is made, the market will be looking for an update on all of the following points (and more):

1. The Australian debt

2. The US debt

3. Status of the US note holders. Rufrano commented that they were ‘in the tent’ but I think they are only holding off until the 15th before deciding what to do.

4. Results from the underlying business. Has revenue or inflows been affected? Have asset prices changed? The annual reports said that this was due on Wednesday (6th). The web site says ‘end of Feb 08’.

5. Which one of the 3 options is progressing the furthest – a) Assets sales e.g. CAWF, CAF b) New Debt facilities c) Equity injection.

6. The net impact to the balance sheet and future earnings as a result.

7. Status of hedging of exchange rates and interest rates.

8. The withheld distributions from December and outlook for distributions for the coming year.

I have thought about this a great deal and distilled the announcement down to one of three scenarios:

“All over” - The company has been forced into administration or is about to die a slow death. Sorry folks, it’s all over. Assets go out the door at fire sale prices. Following this will be 2-3 years of mess, shareholder class actions and directors in court. Shareholders will be lucky to see any money for a long while, if at all. One.Tel.

“Need more time” - The company has been able to secure a further extension from lenders in order to finalise agreements for one of the 3 options. The market reaction to this will be directly proportional to the length of the extension in my opinion. A short extension (days or weeks) will be taken as pressure from lenders unwilling to give them more time. A long extension (months, years) will signal lender confidence in a resolution. The company will signal some interim measures and set a date for the next update to the market. We will all go into a holding pattern again waiting the outcome.

“Final solution” - A plan is presented which details the final solution. The company outlines which of the 3 options (or combination) is going ahead and exactly when and with whom. It will also signal that as a result of this, they have secured long-term lending on the maturing facilities and what the impact is going to be to the balance sheet and earnings going forwards.

The $26.6bn question is of course “which one will it be?”.

In my opinion and based on everything I said yesterday, I think they can pull this off and get the company back on its feet. I have no doubt it will be a very different Centro with a whole new business model though.