Despite everything, it feels like we have a new found wave of negativity emerging on Centro. I am hoping we will get some clarity later this week with the May 30th deadline looming large. Meanwhile though, here are some general comments from me on some points raised here in the last day or so:
We had confirmation from Centro that the extensions through to September and December this year are at the same interest rate as that agreed late last year.
As you doubtless would have seen from the disclosure at half-year, Centro has had to deal with multiple lenders in Australia, the US and private placement note holders. To have achieved refinancing of the debt itself was an achievement, to have done it without higher interest rates is a very good result.
Remember too that some of these lenders are tied up with Centro in multiple ways. JP Morgan for instance has some JV properties, CBA has a large holding in the company, etc. The lenders have also made loss provisions for the loans, which they are going to want to write back to P&L in the next year or so when the dust settles. They have multiple interests in working with Centro for the long term. You also need to realise that Centro have not missed an interest payment to date and based on their current cashflow are unlikely to do so at any time in the future.
To my knowledge, in the last 5 months we haven't seen the fire sale of any Centro assets at all. In fact, we had confirmation that the banks weren't actually putting pressure on Centro to sell assets. If the situation was as dire as some make out, or if the banks wanted to get out at all costs, they would be flogging off parts left right and centre. I don't see this happening in the same way AFG, ABS, MFS, etc. are having to do so. Do you?
When you step back from this and think about what has happened, Centro has achieved a 12 month extension on the Aus debt - i.e. from December 17th last year to December 15th this - and 9 months extension on the US debt - i.e. from December last year to September this. It is likely that the US debt will be extended to at least December this year too, but we wait confirmation on this point.
If, on December 17th 2007, Centro had come out with an ASX announcement and said "We have achieved a 9 month extension on our US debt and 12 months extension on our Aus debt but we are looking at ways to reduce our leverage, including asset sales and recapitalisation", I doubt we would have seen anywhere near the 'crisis' that we have in the last 5 months. We may have seen Centro drop 20% with the other LPTs or even go further and drop 30-40%.
Just on the litigation.. do yourself a big favour and ring IMF (like we did weeks ago) and get them to send you through the 'pack'. Then look at the actual details of what they are doing, who is eligible and what they need to prove to claim damages. I think there are numerous commentators here and elsewhere who are not fully appraised of the situation or what is involved. Also familiarise yourself with the time lines, which at best finish in 2010 and maybe research the recent Aristocrat case to see how these things often pan out.
Roll on Friday.
CNP Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
