Well, Centro are in a difficult situation (one of many currently).
CNP directly and indirectly (through the DPFs) owns 51% of CER and has relied on it for cash. When CER announced in Dec that they were not paying distributions, the cashflow dried up, albeit temporarily.
In the 1/2yr presentation, there were a number of questions around cashflow in CNP and whether they had enough cash to continue operations. If anyone is interested, it may be worth listening to the webcast again. The fact that CNP has taken out some short-term liquidity facilities ($155m?) suggests they are in need of a leg up in this area.
I seem to recall CNP has lent CER some money in the past so we may see this being repaid soon which would send some cash back home to CNP. Past this though, if there is not enough cash coming in to CNP through assets sales, to get cash out CER is going to have to pay it via a distribution (divvy). This has to be paid to all shareholders including the 49% owned by non-Centro entities like you and I.
The other complication here is that CER has a different advisory team to CNP and we will undoubtedly see a different board emerge as part of the upcoming restructure. As a result, CER will do what is in the best interest of CER shareholders which may not have been the case when the same people and boards ran both entities. This is of course a good thing but it may run counter to the interests of CNP at some stage.
All very complicated.... BUT when you distil it down, CER has a stronger balance sheet, limited liability with Super LLC, is generating cash and has a good NTA. We have a large CER holding for these very reasons and given the recent involvement from the big guys, I suspect others are doing the same.
CER is becoming a value investors stock but we may not see substantial movement in the SP until further news comes out from the company,
CNP Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
