CER will not do a capital raising principally for the reason that CER is a subsidiary of CNP and CNP does not have the financial capacity to participate in a share placement.
If there were a placement and CNP did not participate, CNP's holding of CER would be less than 50% and therefore would not be able to carry CER's equity in its books. It would instead have the market value of its investment in CER in its books.
If you remove CER's equity from CNP's books, it would further deteriorate CNP's balance sheet, making it no doubt balance sheet insolvent effectively destroying the stabilisation plan that CNP entered into with its financiers back in January. have a look at the 31 Dec 08 Appendix 4d report for a look at CNP's NTA per share.
There are other reasons why but the above reason is numero uno.
That was why all throughout last year, Rufrano said his intention all along was to obtain long term refinancing for CER. Not once did he mention the possibility of doing a debt for equity swap.
CER is insulated from dilution risk alot more than CNP and probably more than most other REITs nothwithstanding CER's current gearing level.
CER Price at posting:
11.0¢ Sentiment: Buy Disclosure: Held
