postcard from mexico

Dear Bill,
Having a great time in Melbourne. The people are friendly but the weather is a bit colder than back home. There is a lot of building going on so if the country IS having an economic downturn, it's not evident in Victoria. The food is fantastic. I just don't get why we have to pay every time we use one of the roads.
Dennis.

Evenin' all.

Right, straight down to business. In the past 2 days, there have been a few things that have really ticked me off:

1. How hard is it to get a sodding Internet connection in Melbourne? Apparently, I had trouble with my IP address, whatever the hell that is.

2. Why on earth can't people turn their mobile phones off at the AGM. I mean is it really that hard? Every few minutes ring ring this and ding dong that. You're not that important people.

3. Is it too much to ask for everyone to turn up to the bloody meeting on time? People were still coming in 30 minutes after the start. I traveled inter-state and still got there 15 minutes early.

4. Why oh why oh why can't we take drinks into the Centro AGMs? For goodness sake, the directors sit up front with their Mount Franklin bottles bursting at the seams with cold, fresh, mountain spring, yet the people who pay the wages aren't allowed to take any food or beverages in. I smuggled a small bottle of water and some jelly babies in today just to prove a point. Rebel rebel.

Moan over.

Actually, something funny crossed my mind while I watched a couple more people turn up late only to be greeted by the beep beep of an SMS... I like live comedy; the stand-up type. I don't like the kind with lots of swearing, although I make an exception for Billy Connolly who is (in my opinion) one of the funniest people alive. Now, if the Centro Chairman was a stand-up comedian in his spare time, I reckon he would have handled the later-comers a lot better than he did, and probably would have got a couple of laughs along the way.

Talking of comedy, did anyone notice Uncle crack a funny? (It was the one about getting a free bank if you buy a toaster in the US). I felt for the chap, it was a tough audience and the chairman didn't exactly warm the crowd up before GR came on stage. It went down like a fart in a spacesuit actually. I think he should just stick to his shopping centre knitting and leave the comedy to the professionals. 10 / 10 for trying though Uncle.

The CER show yesterday was a bit of a non-event. The fact of the matter is that CNP controls enough shares to pass any resolution it pleases so we were really only going through the motions. What was an absolute disgrace (bordering on inexcusible) was the fact that it appeared nobody in the company knew a) how many CER shares CNP controls b) how many shares CER had on issue. I was gobsmacked.

I came away from CER feeling net-negative about the board, who I think came across as arrogant. The chairman especially. On the flip side, I came out feeling net-positive about the future of CER, which I am now very confident will survive long term. The two major outstanding issues for me are the debt extension and the hedge book. Interestingly, as you probably picked up, SuperLLC has not breached any of the loan covenants. The board separation looks good on paper, but while CNP controls more than 50% of CER, it is going to be difficult to tell them apart.

CNP was a completely different kettle of fish. More people were present to start with and I think the board were ready for a lot more hostility than actually eventuated. Considering the $7-8bn of value destroyed this year, I though it was very tame. For me, the chairman handle affairs well and recovered some of the ground from yesterday.

Stephen Mayne asked a lot of questions across both meetings and all credit to him for doing so. I saw him in action at the BBP AGM which I made the big trip to Sydney for a few weeks back. You have to like his style.

I'm about to express a personal opinion, so if you have young children in the room or don't want me to spoil the ending, please skip the following paragraph.

I am quite convinced that a long term extension will be granted - I base this on everything I know about the company, the words and body language at the meeting today and the magnitude of the collapse were something to go wrong. To the definition of 'long term', the company would not commit, but said 'more than 1 year'. My money is on 2-3 years and for what it's worth, I'd say the deal is almost
done. The company said that none of the banks have said that they will not extend, there are no covenant issues, the relationship between Centro and the lenders has obviously improved and the underlying business seems to be running very well. I do think it will contain a D2E component and from the body language, the board are concerned that the existing shareholder dilution will be hard to sell. As I posted a few days back, $2bn for 80% is still OK on an NTA basis, not great... but OK.

I feel a lot better having attended both meetings and if the audio is available on the web site I would recommend listening if you get the chance. The media has written a lot of BS today and has managed to put a negative spin on events. Ignore this.. you are much better than that. The only outstanding issue is the debt extension and it is live or die in the next fortnight, we already know this fact. Everything else is just media noise written to sell papers.

As Thomas Jefferson, 3rd President of the US said, "The man who reads nothing at all is better educated than the man who reads nothing but newspapers."

(Just for the record, the same applies to women. I guess things were different in the late 1700s when he wrote this.)

Relationship Partner (RP) and I are in Melbourne until Tuesday for a bit of a break. I lived in Melbourne for 4 years a while back and I still love the city so it's good to be back for a visit. I'm just looking for an excuse to drive out to Centro The Glenn or one of the other assets just to check them out while we are here. What do you reckon my chances are? Yeah, zero. Oh well, so near yet so far.

Now, before I head of to bed, I have to tell you this joke..
A duck walks into a pub, sits down at the bar and asks the barman for 18 pints of beer and a packet of nuts. The barman looks at the duck and ...

What? You've already heard that one? Bugger, it's the only joke I know.