Seems to me a lot of people are just focusing on the current...

Seems to me a lot of people are just focusing on the current stock price rather than the business.People have been GUESSING and GUESSING and GUESSING and GUESSING for nearly 9 months about Centro and focusing on 2 much negative factors.

Retail sales 0.7% month on month compared to previous -0.1%.Interest rates are dropping,unemployment dropping.These are all positives for Centro.

Yes probably all agree that debt levels is high.But what about the actual business(this is the most important thing).Centro minus the debt issues are performing well.These are Shopping Malls with great long term tenants.This is a balance sheet problem nothing else.this is why bankers should be supporting them longer term because the cash keeps on coming in.

Are newspapers running the current share price(LOL).Do you buy according to daily articles rather than sitting back and focusing on the whole business than all the negative ones.Block out the negatives and keep your mind focused on the positive side of the business; that's what the banks should be doing also.

Best way to stop prices dropping is "Not to sell your holdings cheap".Why sell lower and let the price keep on dragging and dragging down.Be patient; our market seems to be the opposite lately.

I'd rather people trade with a positive mind and believing 100% that centro will survive than people trade on the emotions; that's why the current price is where it is.People need to have more faith and believe in their decisions rather than going back and forth every day.

Remember greed and fear rule the markets.So when people are greedy that's when you should fear.But when people are fearful that's when you should become greedy.

Put yourself in the Bankers Position; You have centro which is paying all their fees,bank interest and debt payments.A great business model minus current debt issues and a good stable investment for the longer term providing debt levels are acceptable.

Now if you were the banker would you take a massive loss in selling assets in this current CHILDISH market at fire sale prices or would you be wise and say hey lets help this company as much as we can to get back on their feet in order to get a lifetime supply of Cashflow..!!

All this takes is 1 or a few wise investors or consortium to say ok ill buy your current debt and takeover your Shopping Mall business which in turn will scare the banks.



According to RG from "Business Spectator" dated 27th August 2008 He says>> We are looking at one of the best public games of bank brinkmanship that Australia has ever seen. In the earlier Centro shopping centre sale game, a proposal was received from a consortium of Lend Lease, Goldmans and The Private Collection.

The consortium would have bought into the Centro operation, which would have been good for all concerned, but there was a snag. If the deal went pear-shaped, the consortium’s money would have ranked ahead of the Centro banks. The banks did not like the idea. The consortium is gambling that if the brinkmanship game gets too tough, they will be able to return to Centro. Alternatively if the banks decide to blow $3 billion or more, there will be some very cheap shopping centres. It’s a buyers market.

The simple facts are that unless the banks do a deal with Centro Properties shareholders, they will have to write off in the vicinity of $3 billion in unsecured loans, on which they are currently receiving every cent of interest that is owed.

RG "Business Spectator"





That's why they are trying to come up with a reasonable solution to the current problem to please current STAKEHOLDERS not shareholders. These STAKEHOLDERS are the ones with a bigger piece of the pie.These stakeholders bought into Centro over $1.

Shareholders are individuals who own stock (also called shares) in a company in hopes of making a profit. If the company does well, they stand to make money based on how many shares they bought (own). However, if the company does bad, then the shareholder stands to lose his/her investment (money).

Stakeholders are individuals who have an interest in a company, or any organization and are affected by what happens within the institution based on rules. policies, regulations, etc.

This is not the right time to be selling good quality malls.This is about trying to get a longer term extension to whether the current B.S market turmoil and then negotiate in a rational environment.

Once fund managers and investors come back to earth than you'd agree that the market is in a more orderly state.I.E investors and fund managers are still waiting for the right time to buy... LOL When is that time?? when the market drops to 3000 points.Again this is living in fear rather than implementing buy and hold strategies and reaping the rewards in a later bull market.

We need professional analysts that talk about buying in this current market rather than "Sheep Analysts" that continue to follow the crowd.They should be leading the pack rather than follow the herd.

Unemployment figures show that we are at 4.1% compared to the previous reading 4.3%.People are talking about a recession LOL....We must be the worst performing market in the world at the moment and yet our stats are much better than that of our peers.Can u figure out whats goin on?? I can; its all about FEAR and B.s market commentary thats causing this.

If there's ever a chance of a recession you can blame the media i.e. newspaper "journalists and tv commentators."

There's different versions of what a recession is; but according to text books,i.e The official definition of recession is when GDP growth is negative for two consecutive quarters or more; employment falls and unemployment rises.We are far from a recession SO WHY THE PANIC.

Our current gdp on a annual basis is 2.7% with the current quarterly running at 0.3% only dropped 0.1% quarter to quarter from previous.It's amazing the amount of trash you read in the papers that point to a recession.let's focus on our current economy rather than trying to predict what the future holds.

Our All Ords should be at least 5500 to 6000 points considering the current stats. Fund managers should be buying and holding rather than telling everyone to sell most asx listed companies.It's the fear of getting to far ahead of yourself which creates a negative image in the mind.thus trying to predict what tomorrow is all about.

Walk in faith not in fear!!!








If hybrid security is an possibility, then below are some meanings an examples of current options.




Fundraising Using Hybrid Securities

2.1. What is a hybrid security?
The term "hybrid" is given to a class of securities that have the characteristics of both an interest bearing security and
equity ie bonds and shares. In Australia and New Zealand, for example, the most common hybrid securities in the market
are:
__ convertible notes;
__ reset convertible preference shares; and
__ income securities.
"Equity" in this sense constitutes the residual claim to the cash flows generated by the real assets of a company, the
claim itself is residual in the sense that equity holders contract or receive whatever cash flow is left after all the other
contracting parties have received their claim. Examples of equity funding are new issues of ordinary shares, internally
generated funds and the new issue of preference shares.
"Debt", on the other hand, can be defined as representing contractual rather than a residual claim on the company. The
debt contract commits the company to fix the principal repayments over a defined period of time. Once a company issues
debt securities, it is committed to paying interest on the funds and also to the repayment of the principal. Examples of
debt include bank overdraft, commercial bills, promissory notes, leases and debentures.
There are two broad types of hybrid securities.
The first is "fixed conversion". This is the traditional type of hybrid where the security usually reacts or behaves more like
the underlying shares. Typically, these types of hybrid have individual characteristics which include:
Clayton Utz 2.
__ a separate rate of return until conversion;
__ conversion might occur at one or a number of dates;
__ they are usually issued at a similar price to the underlying share;
__ they convert at a set ratio eg one hybrid converts into one underlying share.
A consequence of fixed conversion hybrid securities is that the price of these hybrids reacts to the movement in the
underlying share price, depending on the condition of conversion. Delta is the term used to reflect the measure of the
correlation between the movement in the price of a hybrid security and the movement in the underlying ordinary share
price. Delta is measured on a scale of 0 to 1 where 0 is a low or no correlation and 1 is a high or identical correlation.
The delta for fixed conversion hybrid securities is typically between 0.5 and 1.
The other type of hybrid security is known as "dollar value conversion". This is the more recent style of hybrid where
conversion is virtually determined at maturity not at issue. The face value, usually $100, effectively buys you shares at
the market price on the date of conversion.
Typically, dollar value conversion hybrid securities have the following elements:
__ a set dividend rate over a fixed period (reset period) which at the end of that period can be reset for a new dividend
rate and new fixed period;
__ issued at $100;
__ the holder has the ability to take the new reset terms, convert or, on rare occasions, redeem the face value;
__ the holder can convert into the shares at a discount to the current ordinary share price;
__ the conversion ratio is into a dollar amount of shares eg $100 worth of the underlying equity.
Due to the variable conversion ratio, the price of these hybrids generally does not react to movement in the share price
and hence they are seen as more akin to fixed interest securities. The delta in this circumstance is considered to be 0.
2.2. Why have hybrid securities become so popular?
For investors, hybrid securities provide an opportunity to diversify their investment portfolios and to achieve high returns.
Significantly, the market for non-government debt securities, including hybrids, is being driven by the growth of life and
superannuation funds under management and the risk appetite of fixed income investors, that are slowly moving down
the credit curve in pursuit of greater investment diversity and higher returns, because the supply of highly rated
government debt issues is slowing.
Further, retail investors, which are forming an important target market for hybrids, are attracted by their high returns and
the well known names of the issuers. In addition, there is the ability for investors to exit hybrid securities by selling them
because they are usually quoted on ASX. Finally, hybrid securities are not seen to be as affected by economic or other
externally influenced change.
For issuers hybrid securities provide an opportunity to diversify their funding sources, to manage their cost of capital and
funding structures and to improve shareholder returns. As companies face pressure from shareholders for growth, capital
management initiatives and higher returns, hybrid securities are providing an appealing funding option to straight debt or
equity.
Clayton Utz 3.
Issuing hybrids provides the company with financial flexibility. This flexibility has positives and negatives. Issuing
hybrids, while not as cheap as issuing debt, is usually cheaper than equity financing. Issuing hybrids also minimises or
alleviates the dilution of shareholder interests, which would otherwise be caused by the issue of ordinary shares.
Therefore, issuing a hybrid instead of a straight equity, enables the company, as earnings increase, to increase the
ordinary share price at a greater rate. Hybrids also carry a lower after tax cost than equity adding to their attractiveness.
Traditionally tax has been an important factor in working out the cost of capital. Debt has traditionally been cheaper
than equity because of the tax deductions available to the issuer attributable to interest paid on debt. Australia's
comprehensive imputation regime has mitigated this to some extent because Australian resident holders of shares in a
company are generally entitled to franking credits on dividends received, hence reducing (at least in theory) a
shareholder's dividend requirements. However some companies, particularly those with significant overseas earnings
are unable to fully frank dividend payments.
From a taxation perspective, hybrid securities allow more flexibility than traditional securities in aligning the issuer's
funding requirements with both its own taxation position and that of the provider of the funds. This may result in a
significant reduction in the cost of funding. For example, if a "borrower" of funds is in tax losses and has a substantial
surplus in its franking account balance, it could issue fixed-dividend redeemable preference shares to a financier. The
tax-free nature of the dividends in the financier's hands owing to the availability of franking credits allows a lower cost
of funds to the "borrower", while the loss of tax deductions on funding costs and franking credits is of no serious concern.
Conversely, if a "borrower" of funds expected to generate significant taxable income and the financier was in tax losses,
the borrower could issue convertible notes. The taxable nature of the interest on the notes to the financier would be
inconsequential, while the deductions would generate tax savings for the issuer.
From a non-tax perspective, hybrids have allowed corporates to reduce the immediate cash cost of servicing capital, ie by
reducing the coupon rate payable on hybrid instruments in exchange for an equity "kicker" in the future. Unfortunately,
the tax rules attaching to such instruments were largely based on unclear common law notions about what constitutes a
deductible cost of servicing capital. In addition, restrictive rules applying to convertible notes made it difficult to provide
a significant equity component, and worse still, imposed a tax charge at the time the notes converted into shares.
The new/debt equity rules have greatly assisted this position in two ways. Firstly, they provide a bright line test between
equity and debt. Basically, debt is an instrument where there is certainty that the value of returns will exceed the issue
price. Equity is an instrument where the value of returns is contingent, generally on a company's performance. An
instrument can provide both these certain and contingent returns, but if the certain returns are more than the issue price,
then the whole instrument is treated as debt. Conversely, if the certain returns are less than the issue price, the whole
instrument is treated as equity.
The second important change is that if an instrument is classified as equity, its returns can be franked. So it is possible
to pay a franked (ie tax creditable) interest payment on a converting note. Equally, if a share is treated as debt (typically
a redeemable preference share), dividends paid on that share may be tax deductible. This eliminates the previous noman's
land whereby returns on hybrids could be non-deductible to the issuer but did not carry franking credits.
Accordingly, an issuer can now offer regular coupon hybrid instruments with elements weighted to one or other side of
the debt/equity dividing line, based on the decision whether it is cheaper to pay a lower franked coupon or a higher
unfranked (but tax deductible) coupon.
Finally, the Government has recently announced an important change concerning the taxation of convertible notes.
Convertible notes issued after 14 May 2002 will not be subject to tax on conversion as at present. The effect of this
announcement will be that an investor who holds a relevant financial instrument through conversion or exchange will not
be subject to tax until it is ultimately sold. Furthermore, where the gain or loss on disposal is of a capital nature, the
investor will be able to qualify for capital gains treatment for the period before, and after, conversion or exchange. Such
changes will greatly enhance the attractiveness of convertible notes to superannuation funds.
Clayton Utz 4.
2.3. Key characteristics of hybrid securities
In describing the traditional versus current hybrid, we have already touched on some of the key characteristics of hybrid
securities. The more common terms or characteristics are as follows:
__ Face Value/Issue Price
The issue price or underlying value of the security is usually $100. This is the base value used to calculate
dividends or interest payments.
__ Returns
Like bonds, convertible notes pay a coupon ie interest. Convertible preference shares pay dividends ie set return
on set dates. The dividend is often franked and therefore offers possible tax advantage to the holder. Unlike
ordinary shares the dividend on hybrids is known and predictable. The calculation of the dividend can be based
on a fixed or floating rate of return.
__ Cumulative/Non-Cumulative
This will differ between security but it refers to what happens in the event of a missed dividend or interest
payment. Cumulative means that missed payments are added to the next payment. Non-cumulative means that
missed payments are foregone.
__ Convertible
A security that is convertible gives the holder the option to convert the security into ordinary shares at specified
times (usually reset or maturity dates). If the holder decides not to convert there are generally two other choices
- receive the face value back or continue for a new set term.
__ Converting
A converting security does not give the holder a choice. The security must convert into the underlying shares at a
specified date.
__ Discount
This generally applies to hybrids that do not have fixed conversion terms. At conversion the allotment of ordinary
shares to the holder of the hybrid is calculated on the current market share price. The holder of the hybrid usually
receives a discount off the current market share price (typically around 5%).
__ Redeemable/Non-Redeemable
If a hybrid is expressed to be redeemable this means that at certain times the holder may have the option to give
the securities back to the company in return for the face value/issue price. Non-redeemable means the company
will not offer to take those securities back in return for the face value/issue price.
Clayton Utz 5.
__ Reset/Resetable
A resetable security means that after a certain period (usually 3 to 5 years) the current terms and rates are
reviewed. That is, a new interest or dividend rate is set over a new term. At this reset date the holder generally
has two options, the first to accept the new reset terms and the second to convert into ordinary shares.
__ Creditor Status
It must be understood that in the event of foreclosure the repayment of capital of a hybrid (if in a form of a
convertible preference share) ranks ahead of ordinary shareholders but behind all other creditors. Convertible
notes on the other hand generally rank ahead of convertible preference shares.