CNP are short on cash. If you'd listened to the 1/2 year presentations you would have got a feel for the situation and another piece of evidence was the $155 liquidity facility which was recently announced.
The shortage has come about because the rivers of cash coming into CNP have TEMPORARILY either dried up or slowed to a trickle. DPF and DPFI only paid a reduced distribution, CER paid nothing at all last half and only about 1/4 of what was predicted this half. The individual funds are still receiving good income, it's just that they are retaining rather than handing it over to CNP.
We all should be fine with this... despite what you might currently think, the company can put the funds to much better use than you can.
The company has incurred numerous expenses associated with the debt extension AND they are still having to fund the day-to-day expenses associated with CNP. All this with significantly reduced distributions from the other funds. A distribution from CNP was always a long-shot.
CNP will get around $16m from the CER distribution and it wouldn't surprise me to see CER paying back some or all of the $154m it owes CNP in this half. This will provide much needed cash to CNP and may explain in part why the CER distribution was lower.
Once the funds open up their distributions again (which may happen in part this half and in part over the coming year) cash will start to flow back to CNP. In the meantime, they need to hold on to what they have.
..but can't you feel the winds of change starting to blow? Let me remind you of what Chairman Cooper (who incidentally has a namesake in the current British 250cc speedway motorcycle champion) was quoted as saying yesterday:
(Quote) "We're confident about our future and the banks have shown that they share our view," he said. "With a good property portfolio and a track record of managing those assets well, the main issue for Centro is its balance sheet," he said. "If we can address the balance sheet correctly, we have a good future. (Ends)
If we can address the balance sheet correctly, we have a good future. This is key. Asset sales (which are taking a long, long while to happen), recapitalisation and NOT paying out dividends for a while are the path to recovery. Remember that the final, final stage of debt extensions only took place just over two weeks ago.
What will happen in the coming weeks? Who knows? We do know asset sales are under way, we know they have had offers for CAF, CAWF and equity injections, we suspect from media reports that they have been involved in negotiations for the services business but to date it's all very quiet. I either email or speak to Centro a few times a week and they are really sticking to their guns - "we'll announce something as soon as there is something to say". Not good PR, but then that's a given. This is taking significantly longer than any of us thought (myself included) but we do know a lot of work has already taken place and a lot is still in progress.
Despite everything, they (we) are still afloat, have a strong underlying business, a great CEO, a new chairman and another 6 months to get the house in order. If Centro was going under, it would have done a long time ago.
CNP Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
