I am actually awaiting for a response from Investor Services in relation to the below query
I am hoping that Centro use these clauses as leverage to get a better deal at the negotiating table.
IMO Centro would be better off failing to refinance and just pay an additional 55 basis points (which is double) on top of the current margin they are paying on CMBS debt from Dec 09 until June 2011. A total margin of 1.1% would need to be paid.
By the time June 2011 comes around, Iam pretty sure debt markets will be operating as nearly as smoothly as it did pre Dec 07, which CER would be able to get a longer term and cheaper refinancing package than could be arranged in Dec09.
I'll be bringing this up along with a few other points at the forthcoming AGM :-)
The info memorandum can be found at the following link
I understand that CER has $155m due in December 2009 in accordance with the CMBS information memorandum.
Whilst I understand that CER cannot provide too much information in regards to the refinancing process, would you be able to confirm that the following details would be used as leverage in refinancing negotiations:
- CER would only be charged penalty interest of 55 basis points (total 1.1%) if refinancing is unsuccessful (Please see extract below) - CER will be charged an additional 55 basis points for a period of 18 months after the debt maturity date. (Please see extract from info memorandum below)
Are the CMBS investors aware of these clauses?
In my opinion, this would put CER in a strong position as it does not need to incur margin costs in excess of 1.1% until June 2011. By that time, one would argue that credit markets will be operating much more fluently and cost of debt would be relatively cheap.
Keep up the good work.
Regards,
Tranche Maturity Date: Unless previously paid in full, each Obligor will pay the
Tranche in full on the Tranche Maturity Date in respect of that
Tranche.
If an Obligor is not able to pay the Tranche in full on the
Tranche Maturity Date, then (provided no Issuer Event of
Default has occurred and is subsisting):
(a) the Obligor and each Obligor Security Provider in
respect of the Obligor must, pursuant to the terms of the
Transaction Documents, use the funds available on the
Tranche Maturity Date (from Obligor Collections or
Sale Proceeds in respect of the relevant Properties or
other Obligor Secured Property or from a refinancing of
the indebtedness of the Obligor) to pay the Amount
Owing on the Tranche Maturity Date;
(b) the Obligor and each Obligor Security Provider in
respect of the Obligor must, pursuant to the terms of the
Transaction Documents, commence the sale of a
sufficient number of Properties or other Obligor
Secured Property so that the Obligor can pay the
Amount Owing in full by the date that is 18 months
15
from the Tranche Maturity Date, unless the Obligor
Security Trustee is satisfied that (and the Obligor
Security Trustee may seek instructions from the Voting
Secured Creditors if it so elects):
(i) a refinancing is imminent; and
(ii) if such refinancing does not occur, that there
will remain sufficient time for the Properties or
other Obligor Secured Property to be sold by the
date that is 18 months from the Tranche
Maturity Date; and
(iii) no Obligor Event of Default has occurred and is
subsisting; and
(iv) without prejudice to paragraph (c), the Obligor
and each Obligor Security Provider in respect of
the Obligor will procure that the proceeds of
sale of the Properties or Obligor Securities after
the Tranche Maturity Date together with the
amounts standing to the credit of the Obligor
Collection Account and the Insurance Proceeds
Account after the Tranche Maturity Date are
applied in accordance with Section 1.6 (“Series
Assets - Application of Obligor Collections
following an Obligor Event of Default”).
(c) no Obligor Event of Default will arise, unless the
Obligor or an Obligor Security Provider fails to
promptly comply with a direction of the Obligor
Security Trustee; and
(d) on and from the Tranche Maturity Date in respect of the
Tranche, the Margin in respect of that Tranche will:
(i) for so long as the Obligor in respect of a
Tranche, complies with these provisions,
double; and
(ii) for so long as the Obligor in respect of a
Tranche does not comply with these provisions,
remain or revert (as the case may be) to the
Margin in respect of the Tranche and default
interest shall apply to the then Amount Owing
in respect of the Tranche; and
(e) on and from the Tranche Maturity Date, unless
otherwise specified in relation to a Tranche, the
Payment Dates in respect of the Tranche shall be the
20th day of each of March, June, September and
December in each year, subject to Modified Following
Business Day Convention and each successive Interest
Period will commence on (and include) the next (or
16
first) Payment Date and end on (but exclude) the
following Payment Date (or the date that is 18 months
from the Tranche Maturity Date).
If an Obligor Event of Default occurs (but no Issuer Event of
Default has occurred and is subsisting), the Voting Secured
Creditors may elect to direct the Issuer to apply money
received by the Issuer towards redeeming the Notes in
accordance with the Issuer Priority of Payments.
CER Price at posting:
13.0¢ Sentiment: Buy Disclosure: Held
