Hi axlsusieYes I agree. I reckon if CSF was demerged from CER,...

Hi axlsusie

Yes I agree. I reckon if CSF was demerged from CER, its fair value would be around 35c earning Aust 3c per share($70m profit)

This stems from the fact that all its debt maturities are now long dated. See below

A summary of these are as follows:


CMBS - MLML / Apollo…………US$197.6m………..01/09/2015
CMBS-Merrrill Lynch/Apollo……US$164.4m………….31/08/2012
CMBS-Merrill Lynch/Apollo…….US$96.9m…………….31/08/2012
CMBS - MLML / Apollo…………US$94.1m…………….31/08/2012
Galileo Put Portfolio…………….US$78.3m…………….01/06/2016
CMBS - MLML / Galileo………..US$51.3m…………….01/11/2010
CMBS - MLML / Galileo………..US$48m……………..01/02/2010
Westminster City Center………US$44.7m…………..01/09/2015


Top 8 biggest CSF debt facilities: US$775.3m (84% of total CSF debt)

Total CSF debt: US$923m

As you can see most CSF debt matures from 2012. Other debt facilities maturing within the next year should be rolled over or paid down from further CSF asset sales.




CSF is held within a sub trust that is insulated from the CER entity.


See page 10 of 227 of merger document Sep 2007. Extract below also.

"If CSF Securityholders and CER Securityholders approve the CSF Resolutions
and CER Resolution respectively, CSF will acquire the CPT Assets and assume
approximately $1.4 billion of debt and issue approximately 690 million CSF Securities
at $1.18 per security as consideration. Immediately following the acquisition, CER
will acquire all CSF Securities held by all CSF Securityholders including CPT
Manager. In return, CER will issue CSF Securityholders with CER Securities. In
effect, CSF will become a wholly owned sub-trust of CER."


Benefits of sub trusts are detailed below:
http://www.ober.com/shared_resources/news/newsletters/LendLeas/LL_fall00_02.htm


Sub-Trusts - A trust created under the Act may provide for the creation of a series of sub-trusts or series trusts, each of which will contain such assets as may be allocated to it. The key advantages are that (a) different sub-trusts may contain different assets and have different trustees and beneficiaries, (b) different sub-trusts may be subject to different rules regarding the rights, powers, and obligations of the trustees and beneficiaries, and (c) the assets contained in a particular sub-trust are insulated from exposure to claims against the general trust assets or other sub-trust assets.

On a side note you will note on pg 70-71 of the annual report, most assets are held in sub trusts. Most of this debt is non recourse and is only secured against the assets it was secured against.


Other things to take into account:

- NOI on a look forward basis is US$107.8m
- Total CSF debt taking into account CSF asset sales post 30 June 2009: US$923m
- Total cost of debt on look forward basis: US$48.5m
- CSF operating profit: US$59.2m
- ICR: 2.22

It is extremely likely that very soon all CSF profits will be unlocked and make its way to CER headstock. Glenn Rufrano mentioned in the results ann that the targeted reduction of the facility to zero will further enhance cash distributions from CSF in the future.


When CER decide to reinstate a distribution policy eventually, it may very well come in the form of CSF profits.

There are no LVR covenants and all ICR covenants are from 1.15 to 1.7 (pg 14 presentation)

It may well be worthwhile bringing up at the AGM whether we should be demerging CSF from CER as that will unlock more equity for CER holders....

Any thoughts?

Cheers