Now they will have to pay - we have the money and time to see it forward.
However, it is well-known that much of what they own is profitable (especially in Oz). With regards to timing I think it will have it's upsides given that there is a US election in November - so the US govt will be doing everything in their power to ensure the economy stays on track until then in order to shore up votes and Centro will have the ability to make orderly arrangements now.
Also bear in mind that Centro would have needed to furnish many major banks and institutions with detailed accounts of their up-to-date position, they ultimately have been shareholders "eyes and ears". The stick in their throats would have been that they are unsecured - nevertheless if they thought that the situation was going to get worse then surely they would have been better to pull the pin now rather than later, thereby cutting their losses. So they decided to stick it out and maximise their investments it would appear.
***************************************************** From the SMH Caroline Cummings:
"From what we hear, Centro's directors remain reluctant to offer potential buyers its better assets as the banks want them kept on the balance sheet as collateral," a source said.
"So it's a Catch-22. Other retail owners, such as Stockland, CFS Retail and GPT, among others, have been taking a good look at these assets, but Centro management only seem to be testing the market to determine a value for the properties and not offering up any sales."
Meanwhile, Goodman Group has raised about $260 million through the sale of its British services arm, Goodman Property Investors, and GPI managed funds to Aberdeen Asset Management. It included £12.5 million ($26 million) in performance-based payments over the next two years.
Analysts said the sale was expected and the price would be positive for other groups, such as Valad that operate similar businesses in Britain."
The last 2 paragraphs suggest that recent o/seas retail property transactions are +ve news for Centro.
The announcement today is a massive vote of confidence by the banks and let us not forget the JP Morgan link in all this. Yes Sir Rod saved the day but many would argue that JP Morgan's owed Centro and it's shareholders that. Whilst at the same time JP Morgan would have needed to save face as their repuation was clearly on the line in January.
From The Business Spectator Robert Gottliebsen Centro's big chance
"Let's assume the New York reports are correct and that the Centro banks have agreed to a December 15 deadline. That means that the banks have fully recognised that Centro Properties and to a lesser extent Centro Retail shareholders have incredible power over them; that the companies' assets are being managed well and that their shopping centres will ride through any economic downturn better than most investments.
I detailed on last month (Why Centro is still kicking, April 15) why Centro shareholders have so much power over the banks. In essence the banks have loaned more than $3 billion to Centro Properties unsecured. And to be repaid, the Centro Properties shopping centre management contracts must retain substantial value. But if the banks pull the plug on Centro Properties or Centro Retail, then the management contracts will be worth very little because official administration triggers cessation clauses.
The banks therefore cannot impose a reconstruction on either Centro Retail or Centro Properties that does not deliver good rewards to shareholders, because if the shareholders reject the arrangement then the banks will have no choice but to accept the rejection, given that appointing an administrator is not an option.
Effectively Centro shareholders and the banks have to find a way through the problem. My solution is to enlist the good will of the syndicate holders and convince them to buy some of the Australian centres helped by attractive loans. The exercise is not as simple as it sounds, because of the various cross shareholdings but it is possible (Sizing up Centro, April 28). And if syndicate holders can't raise the money then the banks will have to find some other equity source that maintains as many shopping centres as possible within the Centro management web.
We saw with Tricom and Chimaera Capital that the ANZ was prepared to take equity and trade the businesses out. I think the Centro situation cries out for a similar approach by the Centro banks who, as unsecured creditors, are in effect almost shareholders. Currently they have the downside of being a shareholder, but none of the upside.
So the key objective of the next few months is to sell shopping centres to people who want to keep Centro on as manager. That will not be easy because the outside equity holders will want full value – but the banks can help bridge the gap with attractive finance.
A large proportion of the overall Centro problem is in the US where the company has much greater borrowings and where the US economic conditions are depressing the value of shopping centres more than in Australia.
However, the American banks seem to have cottoned onto the Centro problem better than the Australian financiers, perhaps because they can see that the Centro US assets continue to be managed well – a rare situation for a company with problems. The US banks also feel comfortable dealing with a CEO who is an American."
GR has played this well thus far and albeit at times close to his chest - he is the real hero to Centro shareholders.
There are afterall a number of options as to how Centro can trade sucessfully out of this (not easy by any mean feat but not mission impossible either) and I intend to stick around just to see how they do it, helmed by GR.
I believe I am in good company with Robert Gottliebsen having a small investment in two of the Centro syndicates.
