CNP - Centro Properties Group

[VViCKiD]

So assuming that CNP manages to sell off assets its assets to refinance debt, what are the possible outcomes ?

 

[Lavender689]

Potential extension to Dec.31, 2008 - makes perfect sense given the situation

Centro has time to burn
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Keep your head down

The seven-day extension granted to Centro Properties by its lenders may create the impression of brinkmanship but one of the issues that caused it is apparently an argument between the banks about how generous to be to the struggling group.

Today was supposed to be a deadline imposed by Centro’s Australian bankers and its US bondholders for the group to come up with a satisfactory plan to recapitalise itself. Over time, however, it actually became a deadline for the banks to agree to an extension of the current moratorium on repayment of $4 billion of debt until September 30. The consequences for the banks of not extending would be unpalatable.

Centro’s US bankers had already agreed to give it until the end of September to come up with a plan, conditional on the other lenders also approving that extension.

As it happened, all the local lenders are said to have agreed to a September deadline. In fact, most of them apparently wanted to go further and give Centro and its new chief executive Glenn Rufrano until December 31 to come up with an acceptable response to Centro’s distressed circumstances. One bank, however, apparently came up with a number of last-minute requests in relation to documentation that forced the one week extension.

The fact that the local banks are even contemplating a new deadline beyond September is significant because it indicates that they now fully appreciate their own plight.

The impact of the extra time would probably have been equally symbolic as real. It would have told the “vultures” circling Centro to extract some of its better assets that the banks were going to do what they could to ensure there were no distressed sales.

The banks know that they can’t put Centro into either a formal or informal administration and force it to start liquidating its assets. A formal administration would destroy the value of their loans by wiping out the value of Centro’s service businesses and Centro shareholders would never agree to a forced sales program that left them nothing of any substance.

In any event, the Centro camp appears confident that it will be given at least until September 30 and perhaps longer to come up with a plan that is acceptable to its lenders and preserves something meaningful for its equityholders.

Time is valuable. With the cost of debt rising, property markets softening, the US economy sliding towards recession and the Australian economy likely to slow, it isn’t a good moment for a large-scale asset sale program to be driven by short-term deadlines.

Pushing the deadline back to December would improve Centro’s negotiating position with prospective buyers of its assets and/or suppliers of equity.

If prospective buyers of Centro’s most valuable assets are convinced, or at least concerned, that the banks will continue to extend rather than force the group to dump assets, the Centro team will have some leverage with which to try to negotiate deals that reflect the longer term strategic value of some of its retail centres.

It might be counter-intuitive, but the more time the banks give Centro the less time it might actually need to start reducing its mountain of debt.

 

[sonicwind]

Thanks Lavender for searching and sharing these various articles with us.

Historically CNP's SP has always been much higher than CER's, so naturally at similar prices CNP should be regarded as the "bigger bargain". I think the narrowing gap of the two's SP we saw over the last few months can only be explained by people's perceived uncertainty. When the future becomes more cloudy, SP favours CER, and vice versa. This was demonstrated by the PPI drama in March.

So based on CER's current SP, and assume Centro does get the bank's extension, and that no further bad news comes out, I am pretty confident CNP will edge ahead of CER and stay above 50c in May.

 

[Lavender689]

There has been report from other media (AFR/SMH/the age) re one bank's refusal to extend their loan as their exposure is secured. Has anyone seen that? I reckon , as long as they are the minority amongst the banks, they could either be voted out/refinanced at par by the other lenders. It should not overturn the direction for 5 -month or longer extension.

Also, there has been some fuss created by IMF re litigation funding. I reckon it is not going to cause a major stir given the scheme of things happening here.

If anyone sees such articles, pls kindly share the info with the rest of us.

Thanks, L

 

[Lavender689]

Below is what was posted in another forum.

Lateline made mention that the Sept or possibly Dec extension of debt was delayed due to one institution believing they have secured loans against Centro properties and where not totally behind the extension and would prefer a 'fire sale' to take place.

Did anyone else listen to the report? Sure, I heard right!

 

[Lavender689]

Good News re unlisted centro syndicate funding extension from its website.

BTW, I rang the investor enquiry number (1800802400) this afternoon, and was advised that the "final negotiations" mentioned in yesterday's ASX announcement refers to the financing extension only. It does not refer to the negotiations re the sale of assets.

This adds more certainty to the extension of Centro's financing.

I also queried about media report that a German bank is holding back the extension process, the lady on the other side said she can not comment on that.

You guys can also call the free number above to seek clarifications.

Cheers, L


"Centro MCS Announces Agreement to Refinance Expiring Debt
Centro MCS today announced that the existing financiers to the eight syndicates with debt
expiring 30 April 2008 have agreed to refinance the debt for a two year term maturing April
2010. This new facility is currently being documented and a short term (seven day
extension) has been agreed in order to finalise the necessary documentation.
The eight syndicates involved are Centro MCS 2, 3, 4, 5, 6, 8, 11 & 12.
Centro MCS Solid Track Record
Centro MCS has an excellent track record in managing syndicates, with 36 syndicates
valued at $8.5 billion currently under management on behalf of approximately 16,500
investors. Since inception Centro MCS syndicates have averaged a total return of 17% per
annum. For more information, visit centromcs.com.au.
For further information
Media: Investors:
Mitchell Brown Centro Investor Services
Corporate Marketing Manager In Australia: 1800 802 400
+61 3 8847 1890 International: +61 3 8847 1802
mitchell.brown@centro.com.au From New Zealand: 0061 3 8847 1802
investor@centro.com.au

 

[MangaNOID]

financiers to the eight syndicates with debt
expiring 30 April 2008 have agreed to refinance the debt for a two year term maturing April
2010. This new facility is currently being documented and a short term (seven day
extension) has been agreed in order to finalise the necessary documentation.

ummm.... 2 year extension and not 5 months! why wasnt this announced on the asx? i guess cause its not finalised?

 

[metric]

there is a new, price sensitive ann on the asx. much, much better ann. alls cool except 200 mil. pocket change.

 

[mapna]

Below is what was posted in another forum.

Lateline made mention that the Sept or possibly Dec extension of debt was delayed due to one institution believing they have secured loans against Centro properties and where not totally behind the extension and would prefer a 'fire sale' to take place.

Did anyone else listen to the report? Sure, I heard right!

I remember to read an article on the day that CNP got extension for 7days. because one of the banks requested more documentation. Sorry I cant find that article now ....

http://www.forbes.com/afxnewslimited/feeds/afx/2008/04/30/afx4950189.html

"It said the interim extension would allow time for the finalization of discussions with all financiers and the completion of documentation for a longer term extension."

I have not read or heard anything mentioned about "a bank prefer a 'fire sale'.

Once again - this is my personal info only - DYOR.

 

[propergeez]

Good News re unlisted centro syndicate funding extension from its website.

BTW, I rang the investor enquiry number (1800802400) this afternoon, and was advised that the "final negotiations" mentioned in yesterday's ASX announcement refers to the financing extension only. It does not refer to the negotiations re the sale of assets.

This adds more certainty to the extension of Centro's financing.

I also queried about media report that a German bank is holding back the extension process, the lady on the other side said she can not comment on that.

You guys can also call the free number above to seek clarifications.

Cheers, L


"Centro MCS Announces Agreement to Refinance Expiring Debt
Centro MCS today announced that the existing financiers to the eight syndicates with debt
expiring 30 April 2008 have agreed to refinance the debt for a two year term maturing April
2010. This new facility is currently being documented and a short term (seven day
extension) has been agreed in order to finalise the necessary documentation.
The eight syndicates involved are Centro MCS 2, 3, 4, 5, 6, 8, 11 & 12.
Centro MCS Solid Track Record
Centro MCS has an excellent track record in managing syndicates, with 36 syndicates
valued at $8.5 billion currently under management on behalf of approximately 16,500
investors. Since inception Centro MCS syndicates have averaged a total return of 17% per
annum. For more information, visit centromcs.com.au.
For further information
Media: Investors:
Mitchell Brown Centro Investor Services
Corporate Marketing Manager In Australia: 1800 802 400
+61 3 8847 1890 International: +61 3 8847 1802
mitchell.brown@centro.com.au From New Zealand: 0061 3 8847 1802
investor@centro.com.au

Just a quick note to make it clear (as there has been a post above exclaiming the 2 year extension) Centro MCS is an UNLISTED fund i.e. not part of CNP nor CER, it has 0.5B of debt of which 331M is being extended to to April 2010. CNP's debt of 2.75B is still being worked on hence the 7th of May cut off. I agree that the Centro MCS's news is a good indication of things to come and I like your work and tenacity Lavender689. Just wanted to make it clear to everyone that the 2 year refinance is not for every part of Centro (of which there are many) just for the unlisted MCS fund.

 

[Lavender689]

Thanks for that.

I have actually marked at the top that it is unlisted syndicate. Otherwise, I should have put it in a different way. It is probably a bit vague. But if anyone reads the whole posting, they should know what I was saying there.

Thanks for your clarification, anyway.

Cheers, L

 

[Lavender689]

I reckon the only bank that refused the extension, with amount of probably around AUD150mln (as seen from the announcement) can either (1) be refinanced on a pro-rata basis by the remaining lenders; or (2). via a further short-term extension that allows CNP time to raise fund (not necessarily from asset sale) to repay them. It is minor amount in the whole scheme of things anyway. This is a very reassuring update. The market should react very positively tomorrow.

 

[mapna]

The lastest ann. from CNP re-assure the extension of the debts but the market did not cheer up that much on Friday. Up, down then up again but with cautous .... wonder what else bothers the ppl. ???? imo

 

[vida]

The latest announcement gives confidence as to longer extensions but they are not confirmed and in place yet for all debt issues, and sales of certain assets are proposed but no details outlined. There is positive optimism, promise and assurances but nothing yet is signed sealed and delivered and only once this is all in place I guess the SP will move more but considering all the factors the SP is doing well from recent lows of 23 cents ... going in right direction. We don't like it anyway when it soars, doubles/triples in a few hours as then it will fall heavily in as short a time., slow and sure rising is better than a big spike although this can occur soon too. That is how i see it for now at least and we can only wait & see / next week will be very interesting. As well its intriguing CER is going even better

The lastest ann. from CNP re-assure the extension of the debts but the market did not cheer up that much on Friday. Up, down then up again but with cautous .... wonder what else bothers the ppl. ???? imo

 

[tulasi74]

Back page of the Weekend Fin Review has an article on the debt extension. It infers that the planned extension may have been for 12 months. That might still happen but for the one bank that is holding out. The article also raises another good point about other smaller banks needing to be appeased if one small bank gets its own way and recovers their 178 million. Apparently there may be smaller banks in the US with small exposure. Am hoping it all gets sorted by next Wednesday but have a feeling it might be extended again. I agree with the earlier comment that price will be highly volatile...day traders heaven but its going to be great.

 

[propergeez]

It will be interesting to see what happens tomorrow, there were a lot of buyers in the morning session but in the afternoon they had gone. On all the platforms that I use (Sonray, Saxo and CMC), selling numbers are outweighing buying numbers on a 3-1 basis on the twenty .00X price points available. I have not seen that on CNP for a long while. By the look of it there are some real nerves running through the market concerning CNP.

 

[Lavender689]

It may be:

(1). there is still a twist re the extension;
(2). Major players in day-trading trying to lower the price to do another run;
(I presume there aren't many institutional players trading CNP at this stage)
(3). Dow futures is -37 points at present, though SPI200 is +46.

Last Friday, after the early run to 0.505, CNP dwindled down all the way till near the close of trade on the day and surged again to 0.495 at close. There appeared to be no news.

I reckon it is more likely to be day trader lowering price to do another run.

My personal opinion only.
Cheers, L

 

[tulasi74]

Is selling numbers outweighing bids on a 3:1 basis really that important? CNP closing price today was unchanged but volume weighted average price is still on the way up. Public holiday in QLD saw lower volumes across the board but CNP still maintained reasonable volume. Can much faith be put on the sell bids that are in place? I agree that it does not appear that large institutions have entered the market but they are probably being prudent and waiting for the confirmation before wading in. There was a substantial shareholding notice a while ago that had JP Morgan as a net acquirer of 34 million shares and have not seen anything to suggest they have reduced their holding. I would doubt very much that one small bank could upset all Centro's plans especially as financial review reported that banks are also willing to provide funding for working capital. I think the news will be positive on Wed or whenever it is confirmed but whether the institutions will wade back in is another issue.

 

[propergeez]

It may be:

(1). there is still a twist re the extension;
(2). Major players in day-trading trying to lower the price to do another run;
(I presume there aren't many institutional players trading CNP at this stage)
(3). Dow futures is -37 points at present, though SPI200 is +46.

Last Friday, after the early run to 0.505, CNP dwindled down all the way till near the close of trade on the day and surged again to 0.495 at close. There appeared to be no news.

I reckon it is more likely to be day trader lowering price to do another run.

My personal opinion only.
Cheers, L

For me the run on Friday and Monday morning was from
1. the MCS news on Centro's website and subsequent press articles
2. it was also the first time that the Centro group has quantified its debt amount in an announcement and said positive things about the (hopeful) debt extension - ie the Thursday after close - CNP: Centro Interim Financing Extension Update.

Is selling numbers outweighing bids on a 3:1 basis really that important? CNP closing price today was unchanged but volume weighted average price is still on the way up. Public holiday in QLD saw lower volumes across the board but CNP still maintained reasonable volume. Can much faith be put on the sell bids that are in place? I agree that it does not appear that large institutions have entered the market but they are probably being prudent and waiting for the confirmation before wading in. There was a substantial shareholding notice a while ago that had JP Morgan as a net acquirer of 34 million shares and have not seen anything to suggest they have reduced their holding. I would doubt very much that one small bank could upset all Centro's plans especially as financial review reported that banks are also willing to provide funding for working capital. I think the news will be positive on Wed or whenever it is confirmed but whether the institutions will wade back in is another issue.

There was no buying support in the afternoon session thats why there was a .53 to .495 swing at close, there was no support and it even slipped to .49 at one point. Looking at the no. of buyers in the afternoon session is making me a little nervous for tomorrow. Yes it does matter how many buyers there are in quantity, if the buyers aren't supporting the price then the sellers will sell at a cheaper price. Thus the share price goes down.

 

[Rocket man]

many holders are in for the 'long haul' and will wait for news over coming weeks in hope of good apprecation of share price

many others would have decided to take their 10-20% profit after buying in last week in early 40s or even lower earlier on. Thats what we saw today IMO .. just some profit taking