article from crikey, page-32

It is quite a complex mathematical problem to work out what centro is worth and how much dilution will hurt.

IF the company could be made viable with a secure long-term loan arrangement without dilution then the value returns to several dollars per share. Now this isn't going to happen in the current climate. Nervous banks want a better debt ratio around 65% or better

At the moment I think the balance is about 7.5b assets, 6.6b debt BASED ON LAST ASSET VALUATION - which is probably out of date and may now be about evens until the credit market improves - IF centro survives. In the event of a fire sale debts would probably effectively wipe out sales value.

Value at the moment is hence mostly in profits. If centro can make 30cps after paying debt payments then the pre-debt income must be about $1billion

If they issued equity at current prices to wipe out debt completely then they would be very profitable but would have about another 33 billion shares on issue, for a total of about 34billion shares including the current 854million. profit therefore about 3cps and share value about 30-40c based on profit and about 20c (7.5 billion / 34 billion shares) based on assets, total about 50c. This would not be a great outcome but better than receivership, end certainly good for me in at 22c.

If they wiped out 20% of debt with share issue at current price then they trade with debt about $5.5b, about $2b NTA. There would be about 6.5 billion shares and post-debt profit about $450m or about 7c per share - pushing value nearer to 70c to $1 per share as long as the company is viable with this debt. This is consistent with the company SP of $5 prior to the collapse given added dilution.

For every $1billion of asset sales they reduce debt by around $200-$400 million (depends on how good the sale price is) and make only a tiny dent in debt-equity ratio (Assume debt $6.6, assets $7.5B debt ratio is 0.88). Selling $1B improves this to debt $5.6B, assets $6.5B, debt ratio = 0.86 - sold 15% of assets for a measly 2% improvement - that likely is rapidly eaten by devaluations and interest.

A similar 2% improvement requires raising about $150m with equity.

IF lenders could be satisfied with a 10% improvement in debt ratio then about $750m would need to be raised. Bankers (you can spell that with a "W" if you like) - will screw CNP to shares at next to nothing - likely 10-15c - so that might require 5 billion shares to be issued - dilution about 7 fold - but the company would return to a value about one seventh of it's former value about $1 per new diluted share.


Any means of working it out put centro at 2-5 times current value, so I think that as long as it survives it will be worth more pre share than it is now - and most HC members would at least break even. In the meantime we will all sweat just a little!