Firstly let me say brilliant post; I very much enjoyed reading it!
Tweety & Co. were in the trading room of UBS a few weeks ago and it was explained that the QF guys you speak of are the ones that design & maintain the algorithmic trading programmes ... those buy/sell bots.
We also spoke with Andy Rosavich @ Credit Suisse a few weeks ago too, but that's another story - lol.
It was interesting that Warren Buffet put $5B into Goldman Sachs bagging himself a 10% dividend; so if 'the Banks' were to get a 10% dividend & a 'preferential status', it would be like having their cake & eating it too ie; better security + dividend (maybe) + capital gain - interest payments.
Out of the 3 types of preference shares, the Banks would probably want a "leader". The determination of the pricing is another aspect which atm I can't even consider. The Banks would also collect a healthy capital gain on redemption. The preference shares would I imagine have a finite life where they would be redeemed at a specific date; so working out a 'yield to call' (redemption) means that you would assume the stock would be redeemed and therefore the capital would be repaid. Preference shares would be far less volatile & give stability to CNP because they would not be traded (or not much anyways), and as interest rates fall, a preference share arrangement could provide the Banks with:-
a) better security;
b) better yield for the capital employed, than maybe otherwise available & expectations of a capital gain; and
c) any option is better than sending Centro to the wall in my view.
So, the Banks (being the Banks) have the horsepower & leverage to get the deal they want and reduce the risks of their loans/investments in CNP.
This is more of a safer haven for the Banks imo.
So therefore (in my view) the shares will not be diluted. IMO there will be (for example) a Class A preferential share (which will not be traded as such except maybe between the Banks); and a Class B (which is the more volatile traded stock ie; the existing shares).
This analogy certainly makes sense; and to use your scientific analogy I would call it the "Occam's Razor" approach. This is just one option that may or may not occur because I still think there is an excellent case for a long term 5+ year extension.
In closing I might add that education/experience is never a weight to carry swap and I would like to think that this whole nightmare will lead to generational opportunities - I'm looking!
Cheers, Pie :)
CNP Price at posting:
4.7¢ Sentiment: None Disclosure: Held
