commonwealth bank will put up for auction $110

At this rate with everyone giving up 50% of there debt in CNP its a race to dump the dog.
Agree we should change out name to anything but Centro.
Chart keeps looking good but not enough volume to really get a head of steam up yet.

Cheers
Hotlegs

Centro properties sale an unholy mess John Durie From: The Australian November 12, 2010 12:00AM
NEXT Monday, the Commonwealth Bank will put up for auction $110 million of unwanted Centro debt at about 55c in the dollar.
CBA has had enough of the corporate nightmare, as has Germany's West LLB and RBS and apparently everyone else as the third anniversary of Centro's near collapse approaches. Some 25 per cent of the debt is now with hedge funds, which arguably is good news, given their aim would be to sell at a profit rather than to hold for ever.

CBA had $250m of the $3.5 billion headstock debt, but has sold some down.

The recent revelations in this paper of Lend Lease's $17bn bid for all of the Centro assets was a surprise.

The price, it should be noted, is higher than previously advertised, but equates to book value for the group as a whole.

Lend Lease's consortium had been talking with the myriad Centro advisers all year and in July lodged its formal bid.

Centro made the bid public earlier this month, apparently to show the market a deal was possible when most had given up, and to create some tension in what it hopes will be a bidding process.

So far so good, but this paper also reported this week that Centro had granted exclusive due diligence its syndication business to Brisbane-based Cromwell.

The syndication business is basically a group of investors in an unlisted entity that owns part of the empire in some 33 different groups.

Given Steve McCann's Lend Lease syndicate has offered to pay book value for the lot, it would seem strange to be offering bits and pieces for sale, unless the process is just part of the value discovery to test the market.

Right now no one has a clue, given the $1bn in hybrid debt over Centro can convert into 90 per cent of the company and is valued in the debt market at about $80m.

The debt is now trading around 8c in the dollar.

The equity value of Centro is $165m. While the debt conversion is subject to shareholder approval, the stockmarket thinks the company is worth $1.7bn and the debt market thinks it is worth $80m.

The debt converts into 90 per cent of the company, subject to shareholder approval, so the equity market value now equates to just 10 per cent of the company.

Shareholder approval is of course just one of many approvals needed, and the constituent group has blown out to include two separate class actions, 33 separate syndicates controlling assets worth about $500m, and hedge funds owning the bank debt.

The class actions themselves face some legal issues, given no one is quite sure just what security the banks really have over the assets, because preferential treatment only comes if you can prove there was a reasonable chance of recovering the assets.

At the time of the January 2009 bank recapitalisation, this was a moot point.

If the banks don't have security, then Slater & Gordon and Maurice Blackburn arguably rank on the same line as the banks, and there are yet more mouths to feed.

At this point the banks are asking themselves just how much further they want this process to run.

McCann last year joined forces with the Future Fund and others to buy the ING Real Estate Trust.

This gave him the equity platforms to buy the Centro assets, which Lend Lease would then manage.

But wait -- there's more. The company has $7.5bn in debt, which needs to be refinanced by December.

That means by June, when the board is signing the accounts, it must be satisfied the company will be a going concern next financial year, which assumes the debt will be refinanced.

Now on past form, and given the number of mouths to feed and people to sign off on the approval, the debt refinancing is clearly not a given.

This makes it tough for newcomers on the board, like former Financial Review journalist Anna Buduls to sign off on the accounts next year.

There is, of course, the alternative of bankruptcy.

Now his bid is out in the open, McCann's team is making the obvious point that the choice is his consortium bid at the $1.7bn book value -- or an unholy mess.

Even getting the bid up will be a nightmare, which perhaps explains why there are so many advisers.

The Tony Burgess-Charles Goode team has joined Colin Nicol on the bank advisory team.

JPMorgan and Moelis are advising Centro, along with Lindsay Maxsted, who now appears on the Lazard shingle.

Lend Lease is chaired by David Crawford, Maxted's predecessor as head of KPMG.

Moelis's Andrew Pridham was a close adviser to Andrew Scott, who created the empire and used to run JPMorgan, which may explain why it rates as the biggest debt holder.

The class actions are against the company, the directors and the auditors (PWC), and of course the corporate plod is in therewith a case against the Centro directors.