thinking smart

Agree coppertop, Sub-prime mortgage meltdown with a number of companies for sub-prime lending practices Charges against the duo came alongside a broader crackdown by the FBI called Operation Malicious Mortgage that has involved many arrests of people accused of cheating investors and homebuyers as the mortgage market ran out of control.Most of these big firms in the U.S i.e. Banks and Mortgage companies have really been effected by the indirect and direct involvement by Company CEO'S and Managing directors constant lies and greed thus cheating the system by giving loans to any Tom Dick and Harry.

Centro don't have a business which relies on sub-prime loans and ridiculous rates for home borrowers thus leading into default of the loan.

Taking out bridge loans in order to re-finance through cmbs markets in the U.S. was their driving vehicle.

A lot of the issues in the U.S is related to the domino effect in the sub-prime unit.So my guess; as to why some of the prime borrowers end up paying sub-prime prices is that they are solicited by sub-prime lenders and go along with the deal pitched to them without ever contacting a mainstream lender. Very few sub-prime loan officers will give up a commission by referring a qualified applicant to a mainstream lender. The deal will very likely go down at sub-prime prices, therefore, regardless of how qualified the borrower may be.




Briefly sub -prime is

If you cannot qualify for loans or are having difficulty obtaining credit through the normal channel, then a subprime loan may be your next port of call. A subprime loan is a loan that is given to people with a bad credit record. The interest rate on a subprime loan is likely to be a lot higher than an interest rate you would expect on a loan from a bank.

Many people will use a sub-prime loan when they cannot get credit to help repair their credit rating. There could be many reasons why a person would fall behind on their credit payments. An unexpected job loss, an illness or just bad debt management can start a downward spiral of late debt payments. Once a few payments have been missed, the interest can start escalating at a frightening rate.

Once you have a bad credit history you may find it hard to open new accounts, gain credit or be accepted for a mortgage. The subprime loan lender will take into account how severe the bad credit history is. From the credit rating he will calculate the amount of interest, depending on how good or bad a risk the borrower is.

Sub-prime lenders market aggressively to home-owners who already have mortgages. A major pitch is the cash that borrowers can take out of their properties through a cash-out refinance. They target groups and areas that promise to have many sub-prime borrowers ? lower-income black neighborhoods, for example. Many occupants of such neighborhoods will be sub-prime, but those who aren?t and who go along with the soliciting firm will pay sub-prime prices.

Finally i'm hoping for a good result come Sunday night in the U.S and with the extension in place for December
Where else would the U.S lenders have their money? these U.S lenders know it's in their best interest to extend and secondly why would u take a loss on a company who are up to date with the payment of interest and banking fees.

The malls can service the debt so hopefully we might see a recap of the balance sheet within the next few months or a take over offer which is acceptable to lenders and stakeholders.

Question

If u were a lender from a bank to a business with quality assets that appeal to everyday daily needs,would you wrap up the business and take millions to billions in losses by fire sale? or would u look at the underlying business and say hey wait a sec this business can repay their debt.Lets have a look at their business plans moving forward and yes we know they have a short term problem and what we probably need for the group is a longer term extension of say 3years + to get us out of this market volatility and to establish stability within the Centro Group thus; achieving asset sales further down the track; BUT wait this isn't a sub-prime loan or a fish and chips shop,this is a shopping mall business that people need for everyday use. So should we help them out or should we act in a foolish like manner by taking a big haircut on fire sales where as a longer term extension makes us look better so their is no need for a loss now as we can get the value back on the malls in the longer term thus making Centro more stable and centro raising capital via issue of shares when share price is reasonable say $1 plus and Centro paying back more debt in the future.

My guess if the bankers had any brains they would favour a longer term extension and give centro the help that is needed in the shorter term to whether the current market storm.

That's the only way the bankers can get their money back plus profits if they only concentrated on the longer term not the short term. I understand different banks have different methods of dealing with certain issues like this but if they were smart they would let the public know indirectly that they are supporting centro in every way possible because this will lead into more interest from outside players and local players therefore helping asset sales and paying off short term debt.

Bankers need to think smart rather than act foolish in short term issues.This is not America this is Australia a land of opportunity.