"why would they prop them up when they could clean them out ?"
Good question.
If the banks thought they could get all their money back, I think Centro would be broke by now.
If Centro had assets of $32bn and debts of $26bn, and the banks thought they could flog off all the assets for at least $26bn, they would have started by now. And the shareholders' 6 bn worth would disappear.
But the banks don't think they can do this.... for several reasons.
One reason is, in the current property market, they would not be sure they could sell the assets for $26 bn. Because of falling property prices, and the fact that potential bargain hunters would have trouble borrowing the money to buy them.
Second reason is, Centro's legal structure is so complicated, banks would not be sure they would be able to get their fair share of the liquidation proceeds. Some banks may miss out - and they are not sure which ones.
Third reason, some of that $26 bn of assets are intangible and might not be worth much at all.
CNP Price at posting:
0.0¢ Sentiment: Hold Disclosure: Held
