gearing ... on gearing ... on gearing ...

Gearing … on Gearing … on Gearing ...

This is what CNP is doing with its 3-tier financial systems.

(1) First if they got $1 equity in CNP, then they will borrow another $1 (gearing ratio of 50%) to make it double to $2, and they “invest” the $2 in CNP’s Trusts.

(2) Then with this $2 as equity the trusts will borrow another $2 (gearing ratio of 50%) to make it double again to $4, and they “invest” the $4 in one of the CNP’s Syndicates.

(3) With this $4 as “equity” the trusts will borrow another $4 (gearing ratio of 50%) to make it double again to $8, and they finally buy shopping centres.

Thus the original $1 buys a $8 property by a 3-stage gearing.

So when CNP shows you the debt gearing ratios of its trusts and syndicates all ~50%, the real gearing ration is much much higher. This is why all the banks have refused to refinance it and a fire-sale is on.