Print MARTIN COLLINS: John Durie | May 09, 2008 CENTRO boss Glenn Rufrano now has the banks in his pocket but, this crisis solved, the real work is only just beginning. Which means asset sales in a hurry.
The timetable is clear but, after months of talking, the clock is well and truly ticking on the action agenda.
This means selling some of the Australian shopping centres, the Centro America wholesale fund and a joint venture for the funds management business.
Getting the bank debt in order is obviously important because, while the debt holders were fighting, the equity investors had an armchair ride to assets on the cheap.
More realistically in the case of Centro, potential buyers of even secondary assets had obvious concerns about going anywhere near the company while the debt was uncertain.
This was not easy in part because German bank WestLB was holding out on its $168 million exposure, primarily because the Government had assumed control of the bank and wanted to make sure its book was in order.
But the Australian banks were also baulking at terms that were shifting perceived controls away from the local debt providers.
In the end, late-night calls between JPMorgan chairman Rod Eddington and CBA boss Ralph Norris sorted out the concerns.
These related primarily to documentation to ensure the Australian banks would not be in a worse position.
Sir Rod's bank has $2.1 billion at stake, if Centro were to collapse, which is roughly double the CBA exposure.
The reasons, then, for his concerns were obvious - which explains why he felt the need to pull Norris into line. Sir Rod and Ralph had a chat, and in the end both were happy and a potential snafu was averted.
But there is still a May 30 deadline by which all the documentation must be completed or the banks will lose control over the assets.
The banks, it seems, are mindful of the Sons of Gwalia decision, which gave equity holders equal ranking, and this issue is being brought to their attention in terms of the negotiations.
The immediate debt issue is, of course, small beer compared to the real problem ahead of Rufrano and his advisers Carnegie Wylie: selling enough assets and simplifying the structure.
The game plan is clear but execution is another issue and, somewhat extraordinarily, the company has failed to act on the most obvious governance issues.
These include the fact that while everyone acknowledges that Centro Properties and Centro Retail should have different boards, the same folk still sit on both.
Now that the banks are seemingly under control, just maybe Centro can operate as a sort of normal company while the asset sales proceed.
There are still a couple of parties interested in an equity injection in the head stock in exchange for a leveraged position of higher ownership if it all works out.
These private equity consortiums may also be interested in a stake in the funds management business.
Attempts to sell the Australian shopping malls as a combined unit have been scrapped in favour of individual asset sales to make them easier to sell.
The ducks are all lined up; it's just a matter of execution now.
A test for ASIC
ASIC boss Tony D'Aloisio is a past master of doing organisational reviews to equip his team for the task ahead.
Yesterday, the new structure for ASIC was released with plenty of asset shuffling but time will tell what has changed.
The top 54 jobs in the regulator at the top of four central functions will be split into 41 positions in charge of 17 units. In addition, D'Aloisio has flagged hiring outsiders to fill 10 or 25 per cent of these jobs.
If this happens on advertised lines, then the changes will be revolutionary.
In days past, ASIC has suffered from the classic bureaucratic problem where experienced staff reach a ceiling and don't move. It's good to have institutional knowledge but bad to block new talent.
On paper, the new structure will fix this problem.
The changes came with all the right words about being market facing and the like.
Suffice to say, time will tell.
Sadly for ASIC, when people lose money it is always blamed for doing nothing and, worse still, the first to pass the buck is fellow regulator the ASX.
The Government is widely expected to approve the sanctioning of new exchanges that will come with some changes in the regulatory structure.
Further comment must await these changes.
Oxiana uncertainty
THE run on Oxiana came to a halt yesterday ahead of the expected filing next week of the scheme documents to implement the so-called merger of equals between Oxiana and Zinifex.
Oxiana's stock had gone on a run in the past few days ahead of the filing with everyone from Xstrata to Ming Metals mentioned as possible buyers. But yesterday, Oxiana slipped 1.1 per cent to $3.54 a share.
If a rival bidder were to emerge, it would probably wait to see the formal documentation for the scheme meeting.
Neither Zinifex nor Oxiana report any knowledge of a rival bidder.
IAG stands firm
SEPARATELY on the takeover front, while IAG's stock price is going nowhere, its board is by all reports steadfastly refusing to engage with QBE.
It rightly thinks QBE is trying to get the company on the cheap and is awaiting first a formal offer and secondly one that includes a takeover premium.
The Origin board has engaged with its proposed bidder, BG Group, but its stock price at $14.25 a share remains well below the $14.70 cash bid suggested.
In part, this may be due to regulatory concerns which, while played down by both sides, are real and the ACCC is sure to demand some concessions before approving any deal.
The first step, of course, is some agreement between the two sides and this is by no means a given, since Origin's Grant King has now received external validation of his long-held view that his company should be valued more as a resource stock than as a utility and that, given the carbon-constrained world, his product demands an even higher value.
St George fights back
ST GEORGE Bank's Paul Fegan defends criticism of his claims to lift second-half earnings by about 17 per cent to reach forecast profit growth of at least 8 per cent by pointing to past decisions.
Most notable of these is the 40 basis point interest rate rise in the past six months outside the RBA moves.
Fegan figures that these will add $200 million to earnings and he will get another $50 million from more stable equity markets. The latter is outside his control but the former presumably is offset by the fact he has also had to increase deposit rates.
It doesn't say a lot about the competitive banking market if St George can raise rates without losing customers and in the process boost profits.
CNP Price at posting:
0.0¢ Sentiment: LT Buy Disclosure: Held
