Well, I'm disappointed that there wasn't a huge level of detailed information but as an investor that spends a lot of time researching, there is never going to be enough. Appeasement?.. maybe in part.
In December last year, according to most commentators, Centro was gone there and then. This continued into Jan and early Feb.
We bounced from debt extension to debt extension for a few months. Commentators still believed that the banks were running the company and had only issued a stay of execution every time the debt was extended. Numerous uses of the words 'administration', 'liquidation'. Even the CEO said that if the debt wasn't extended, the company would be liquidated.
We got confirmation of Sep/Dec extensions earlier this month, but these were delayed by issues surrounding liquidity facilities which brought on more use of the L and A words. Even when they came through, it still seemed like everything was contingent on quick asset sales. The market priced the company like it was going under and has done every since.
Does this announcement today sound like a 'debt ridden' company on the brink of collapse trying to fire-sale assets to repay greedy banks, screw the shareholders?
Nope.
If you look at AFG and ABS for a moment (both of whom have been grouped with Centro in the 'high profile credit crunch' victim category) they are flogging off parts left right and centre. All Centro has done is $66m of asset sales. This is about what Centro would do as the normal course of business from their disposal list in a 6 month period anyway. They didn't even start to market the properties in CAWF until earlier this month. If the pressure was on, Centro could have fire-sold a couple of entities to raise some much needed cash to appease the bankers... but it didn't. Some of the Australian assets would have sold in a heartbeat.
So, I would say this has turned into a good old-fashioned corporate workout. The announcement lacks detail but they have succeeded in extending the 'time horizon' past the immediate future and into late 08 / early 09, which is why I think this is clever.
I have no idea what this is going to do to the SP short-term. We know asset sales could come at any point and when they do, it will move up step by step. The half year results will add another dimension and reinstatement of dividends at some point will set the scene for the future.
Centro still has a way to go, but it seems clear that the company is going to survive.
CNP Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
