Sure the facts are that CNP over-capitalised by lending short-term to buy US assets art the peak of the cycle. Why do you think Westfield were selling them their own assets?
Of course I understand the difference between capitalisation and operation. Their borrowings allow them to maintain a hgh level of operational revenue. But they have to sell some of their assets which will impact on their revenue.
Let me give you an example. If I own a house that I rent and I receive $1K in rent but the house is geared 100% but I can afford through revenues to service that debt, then I am operationally effective. How much am I worth though? I am worth zero because I dont actually own the house, so when thatasset is sold I am worth zero.
Unfortunately for CNP they bought property in the US at the peak of the cycle so for them its even worse as, when they sell those assets at a discount it wont cover their borrowings for those properties. Even worse the investment scheme CNP used creates all sorts of difficultie in trying to sell those assets.
So to be totally blunt, I don't give a cracker about their current operational capabilities, the fact is once they come out of this debacle, they will be a tiny, weeny shadow of their former self.
Is that worth 25c? I don't think anyon really knows what it is worth until we have the final details of the great escape plan.
CNP Price at posting:
0.0¢ Sentiment: None Disclosure: Not Held
