BOTH Centro and Allco seem to be staggering from one short-term debt extension to the next. With more and more shareholder money getting chewed up in the process.
Centro announced yesterday it was working to finalise terms by next Wednesday to extend $2.8 billion of debt facilities to "at least September 30".
And after September 30? Well, in these harried days, that's deep into manana territory. Let's get through May, and June, and so on, first.
Further, there's the matter of another $2.5 billion whose lenders are supporting the "longer-term (five-months) extension". Subject to the $2.8 billion being agreed.
The clear-cut good news is that the final $1.3 billion owed (which takes the total up to $6.6 billion) has or is in the process of being extended really long term, to 2009 or 2010.
Now despite these week-to-week nail-biters, and the disclosure of a $200 million bank hold-out -- how much of a hold-out was not disclosed - things actually look pretty good for Centro.
And the reason is simple. The lenders would be nuts to pull the pin.
They'd only blow themselves up. For two reasons, it's much better to keep Centro alive.
First it's just too complicated. If you pulled on one string, it'd be nightmare - and years in court - trying to work out who had better security to specific assets.
Secondly, the assets have real and strong cash flows - the shoppers.
Even with an economic downturn, or worse, the real value of the assets will not only be sustained but the cash to pay the interest on the debt.
Apart from the uncertainty and all the negotiating, Centro's actually a pretty reasonable credit. Provided you can persuade everyone to stay in the tent.
So far as shareholders are concerned, this offers not simply the best hope of getting something back, but reasonably quickly. The alternative is zero and a long mess.
The big difference with Allco is that it is a dynamic business. Much of its value is in the intangibles of its business success. All of its cash flow is in keeping the business going.
Similarly to Centro though, there's no point in the lenders pulling the pin. Indeed, there's even less point. The mess would be as big without the real assets to fight over.
Allco had to do what it announced yesterday: esentially write off the value of much of those intangibles.
In doing so, it leaves the lenders standing on a much smaller real asset base to 'secure' their loans. But should also concentrate their minds, that their real security is a successful bail-out.
And like with Eddy Groves at ABC, the guys that got everyone into the mess in the first place, are the ones - the only ones - to work them out.
CNP Price at posting:
0.0¢ Sentiment: Hold Disclosure: Held
