my revised nta take is now 1.32, page-26

Apprentice,

Fair enough, and as per your belief you acted on it. Therefore by definition you are correct as the risks posed by CER's situation where not appropriate for you.


Here's my take on a D2E situation:

Firstly I'd be lying if I didn't admit that is does vex me slightly. It is a distinct possibility. You cannot completely discount it

Secondly, if you look at CER (and CNP's) debt stabilisation process, and also keep in mind what I have previosuly said about the banking syndicates post-CNP-D2E-look-through ownership of CER, it would be a bit rich, no make that very very rich of the banking syndicates to put that type of squeeze onto CER in two years time as opposed to doing the whole lot in one go with CNP.

I say this with the view that the debt stabilisation was just that. It stabilised the businesses. Operationally there is no issue with CER. CNP as a more complicated business was not going to be saved by asset sales alone. CER is purely a property trust, it just need to sell assets.

Three things are now abundently clear:

1. CER is selling assets, slowly but surely.

2. The liquidity trap/credit freeze (call it what you will) is just about over. LIBOR spreads are normal. It's back to sound credit assessment with a little bit of paranoia. I say this fully conceding that the economic situation is cr*p and this is what will slow down asset sales not a credit freeze per se.

3. Raising funds from capital markets is (now and ongoing) an easier process of "internalising" an interest in CER. A D2E will mean that banks have to post assets to their own balance sheets to cover the D2E swap. They have to maintain certain Capital Adequacy under Basel II. They have just about all of them recently done this by tapping the market. They would probably need to do this again to shore up their balance sheets to some degree.