bought at 24.5, page-68

Byteme,

you are so wrong you are deluding yourself.

1) Commercial Property Prices are already falling and set to fall further. The problems in the US are a lot more than 'sub prime'. Prime mortgages are defaulting at record rates too. Hedge funds are overleveraged as a result of easy debt in previous years.

2) CNP does not own the properties - the banks do. It is time to get it out of your head that CNP has all these 'assets'. What it has is a massive liability to pay in the form of debt. Expect the value of those assets to be trimmed substantially.

3) You agree on point (2) but then believe that because CNP were cashflow +ve that getting new debt to keep Centro going should be just a matter of time. You forget that in the current climate Hedge funds and banks need to 'deleverage'. They can't sell bad assets - so they have to sell good assets to realise cash. A shopping centre is a good asset. Bear Stearns won't be the last of it. CitiBank and Lehman Brothers are the next two big boys in trouble. US Finance institutions are in a fight for survival.

4) With US heading into a recession, it is obvious that revenue in AUD terms (not US$ terms) will be going down as people are forced to buy fewer goods at shopping malls. Further pressure on AUD earnings are added by the constant devaluation of the USD.


5) If it was all such a breeze and is down to Rufrano's negotiating tactics (as you seem to imply) - then why on earth haven't the banks simply rolled over this debt? I'd be willing to bet either:
- The banks will sell and get their money back, leaving Centro with very little.
- The banks will only agree to a partial funding, leaving Centro with a lot less than it currently does.

6) The market is always right.

7) When we do finally find out the funding deal - then the market will not fully discount future earnings/dividends instantly. It is impossible for you to tell what a future deal will be. Therefore buying CNP right now is a gamble (plain and simple). Buying CNP after an announcement - might be warranted.

8) How do you see the refi being structured?

Joel