centro hybrid scenario testing

Hi guys, this is my first post as I felt I had to throw out my basic attempt at understand the hybrid deal that has been put in place.

The key issue to remember here is that only $1bn in debt has been converted to the hybrid. It could have been much worse but for the efforts of Glenn and his team.

I have put together a quick spreadsheet showing the scenarios tested. I could email this to you if you send me an email to [email protected]. It is very simplistic but conveys my thinking at this stage, however I would appreciate feedback on flaws (it is 1am!) as I'm sure there will be some. You can also play around with the underlying sensitivities.

http://s487.photobucket.com/albums/rr235/vietgod_syd/?action=view¤t=CNPHybridScenarioTesting.jpg

The basic gist of the scenario testing indicates that the banks anticipate the CNP market value to eventually exceed $5bn in order for the hybrid conversion to be viable. This is not too far fetched as the commercial property market turns around and Centro is valued at levels before the credit crunch ($9bn). They do have 7 years in which to convert and that should be plenty of time for the market to turn around. The services business will continue to deliver growth and profit, potential dividends will all be used to pay down debt.

The lenders now have a vested interest in seeing Centro do well as they have a lot to gain. On the other hand, if Centro can execute a successful asset sale program then this debt could be potentially be repaid without the issue of conversion hence dilution (lenders have already secured a 15% stake in Centro for peanuts so they wouldn't mind really).

The 3 year extension of the remaining debt will allow Centro to conduct an orderly asset sale program, hopefully in the environment when commercial property turns the corner.

This is my 2 cents, I hope you can give me some valuable feedback (even if it's to tell me I'm a complete dope!).

Cheers,
VietGod.