first cut analysis

Well, here's my first cut. The ink has barely dried on the ann print-out so I reserve the right to put out second, third, fourth, etc. cuts later....

Let me start by saying that anyone who is a shareholder (and therefore a part-owner in this business) should feel exceptionally proud of what our CEO, advisors and all of the staff at Centro has accomplished here. The company was an absolute mess late last year as a result of the path the ex-CEO and directors had taken. These will be dealt with in due course but meanwhile, do not ever underestimate the enormity of what has been achieved. It is quite remarkable.

So, onto the meat:

Firstly, up until the recent CEO comments, everyone just assumed that the company was pushing for a 30th September extension. 15th Dec has exceeded expectations and is a reflection on the underlying business and the willingness for the banks and the company to worth through the issues together. In effect, the company has succeeded in getting 12 months worth of extension from 17th Dec last year to 15th Dec this year.

The company has stuck to their plan all the way through and has handled this in a very professional way. It has set them apart from the likes of AFG, who quite simply imploded.

We knew all along that the banks would be looking to convert unsecured to secured where possible so it has come as no surprise that they have provided security and mortgages to lenders.

The 30h May portion looks to be a couple of administrative requirements around an additional working capital facility and inter-creditor arrangements. Believe me, Centro will hit this in a heartbeat.

The absolute stand-out for me at this stage is that there is only a 1.75% margin on on the debt. Don't get me wrong, it's a reasonable amount but it is nowhere near the 5-6% that some dumb-wit analysts and commentators have been predicting. I could probably work out how much this will impact the earnings given time. Remember previously that I modelled 2% and it didn't make a burdensome impact.

As for the additional 5.5%, this will only cut in if the company defaults, which is now almost out of the question.

The $155m looks like capex, advisor fees (previously estimated at $44m from memory but probably more now) and lender fees. I think there was mention of the banks charging a one-off extension fee in one of the presentations. I wouldn't worry too much about this - I would say the company will get this across the line quite easily.

The company said the banks were not pressuring a fire-sale and this has been confirmed. There is now plenty of time to arrange an orderly sale of assets, if indeed that is what is still required.

CAWF - A couple of weeks ago the company indicated it may break up CAWF and sell the individual assets. This is a great move IMO. A big thumbs up from me here.

CAF - They said that marketing of CAF started later than CAWF. The fact that they have had offers is really good news. Let's not pre-empt anything for 30 days though. They may have to sell at below book, they may not.

Group complexity - We should be glad they are looking at this.

Well, the wait was certainly worth it. The important thing now is for the company to remain focused on debt reduction and recapitalisation. It is going to continue to be a tough slog but the healing process is well under way.

I would say we will see frantic activity in both the CNP and CER markets tomorrow. Value investors, speculators and ex-disbelievers, who have been waiting in the wings, will pick over the ann details and may start to take positions in the short-term. Either way though, I think the days of sub-50c share price may now be over.

My word, I need a drink. Champers anyone?