Some posters have suggested that hedge funds are in for the short term. Who knows. I am looking at the interest in the debt by new parties. Thus, if this is the case they have bought the debt at say average 50c to 65cents in the dollar (based on media reports).
The first sale by Royal Bank of Scotland was for 50cents reported in The Australian. Since then ANZ more recently have sold debt at 65cents (based on media reports). So it has been re-rated.
How does this occur? I guess like the sale of anything it is based on what the buyer and seller agree. Thus, if the risk associated with the Debt is perceived by the buyer to be declining then maybe they are willing to pay more for that Debt than recent buyers have. The risk being Centro folding and not being able to pay its' interest payments. (Yes for the sake of explanation I recognise that CNP represent a greater chance of this than CER)
The key is the valuation cycle in properties swinging back up which should come out of the EOI process and vacancy rates falling in Centro properties improving income to pay interest. This is what I mean by it being re-rated. Maybe new buyers of the debt may have to pay 70cents or 80 cents in the dollar. The out take is that larger money with more information views the Centro risk/reward equation more favourably than 6 months ago.
In answer to your second question I have interchanged LVR and gearing ratio, which may not be technically the exact same thing. Happy for someone with more knowledge in this area to correct me.
Hope this clarifies what I was saying???
CER Price at posting:
25.0¢ Sentiment: Hold Disclosure: Held
