Thought I'd just share why I believe no debt for equity is being considered:
- As CT rightly pointed out a while ago, a debt for equity swap for CER would effectively be a double debt for equity swap for CNP
- If CER enter into a debt for equity swap, CNP will no longer have a 51% holding in CER and therefore according to IFRS, can no longer classify CER as a subsidiary and will need to remove CER's equity from the consolidated statement of financial position. Looking at the writedowns CNP have made for 31 Dec 08 and comparing it to the equity it had at 31 Dec 08, if you removed CER's equity from CNP's consolidated accounts, CNP will be balance sheet insolvent. This would destroy CNP's stablisation plan
- CER have already entered into a stabilsation plan with its financiers stabilising and securing the future of CER.
- Aust debt was refinanced successfully last year. No reason why it shouldnt be refinanced successfully this year
- Cost of Aus debt decreased dramatically in last 6 months. All of Aust debt is variable. Interest Cover Ratio has increased as a result.
- CER can lose only a maximum of their equity in SuperLLC and CSF. SuperLLC and CSF are quarantined in their respective trust holdings. CER would elect to place these holdings in admin rather than do a debt for equity swap. (Likelihood of CSF and SuperLLC going into admin are remote anyway)
- US property sales have progressed well in last few months
- As far as I know, the accounting firm that was doing alot of consultancy work on behalf of the banks last year to investigate CNP's financial position are no longer doing anymore work.
There are other reasons but I'd say these are the main ones.
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