CNP - Centro Properties Group

[nioka]

According to a news article today there were a lot of CNP staff who were encouraged to take out large margin loans in their companies stock. Some have had to sell residential properties to mee those calls They evidently had a lot of stock. Maybe some of this is still circulating in the market or being introduced into the market. There will certainly be some sellers selling to get a tax advantage and probably buying back in.

There certainly has been volume traded and it is not just the price that fluctuates. I have a sell order in for 60c. I have been anywhere between 223 and 400+ in the queue at different stages during the day today. That is a lot of coming and going sellers which is not normally the case where the price has remained in a narrow margin during the same time.

 

[tulasi74]

There are a couple of articles in the Fin Review and suggests tha the debt extension might be under threat because of the one small bank.

 

[propergeez]

Low volume day (9m - 10am to 3.30pm and then 6.5m in the last half hour) which is hardly surprising considering the possible outcomes of tomorrow. I was glad there wasn't too many nerves from the sellers - a 2.5c loss is not bad considering everyone is waiting for survival or bust news. Also glad that I sold out at .51 yesterday and went back in at .475 today, (well today I am glad, tomorrow could be a whole different story;-)

 

[Lavender689]

SMH article re the twist in extension
(it sort of echoes my previous analysis that the other banks may refinance West LB out, and allow themsellves time to recoup debt.) However, I reckon given CNP's current circumstance, it is more likely that for the AUD200mln, there will be only an interim extension, with the amount to be repaid from asset sale agreed by the lenders.

I reckon, it is only a small twist in the extension, it may well be that the rest of the loans (for Australian at least) could be extended till Dec. 2008. As it makes perfect sense to give CNP more time to potentially achieve better sale price (1). as the property price slowly recovers,
(2) the credit crunch eases;
(3). prevent massive discount as the buyers try to take advantage of CNP's current circumstance.
(4). in line with (2). it will be easier for potential buyers to raise fund for the purchase.


Carolyn Cummins
May 7, 2008

THE beleaguered Centro Properties Group has until later today to fend off administrators and strike a deal with its bankers to extend its $4.2 billion debt deadline for the fourth and - the market hopes - last time.

Last night Centro's chief executive, Glenn Rufrano, was in discussions with all bankers on a deal to help his business survive. They are expected to continue today.

St George, which has a fully secured loan of $458 million to Centro, confirmed yesterday that it had not made any provision for possible losses, as it remained confident the deadline would be extended, allowing Centro to work its way out of its mountain of debt.

Centro's financiers and management were still trying to find a solution to the obstacle created by troubles at the German bank WestLB, which has prompted it to hold out on an agreement to extend Centro's debt deadline.

One solution could involve some interim loans being extended from the rest of the Centro banking syndicate.

One retail manager said yesterday that it was a case of whether Centro's primary lenders in Australia, including ANZ Bank, Commonwealth Bank, NAB and JP Morgan, were prepared to help out the German bank or risk losing a combined $4.2 billion now and even more by the end of the year.

This will be the fourth extension of debt repayments granted to Centro since it hit the wall in late December. Its troubles were due to its over-ambitious expansion plans in the US just as the credit crisis was gathering steam.

Since that time its market value has plummeted from $6.3 billion to $397.2 million at the close of trade yesterday.

Mr Rufrano was given an extension until today to get all the banks to approve his refinancing program, which includes asset sales in Australia and the US, and even an equity injection through a takeover of the whole enterprise.

"From what we hear, Centro's directors remain reluctant to offer potential buyers its better assets as the banks want them kept on the balance sheet as collateral," a source said.

"So it's a Catch-22. Other retail owners, such as Stockland, CFS Retail and GPT, among others, have been taking a good look at these assets, but Centro management only seem to be testing the market to determine a value for the properties and not offering up any sales."

Meanwhile, Goodman Group has raised about $260 million through the sale of its British services arm, Goodman Property Investors, and GPI managed funds to Aberdeen Asset Management. It included £12.5 million ($26 million) in performance-based payments over the next two years.

Analysts said the sale was expected and the price would be positive for other groups, such as Valad that operate similar businesses in Britain.

 

[nioka]

Normally CNP would look like the best buy ever. The balance sheet shows a share holders equity of $3.5 billion and a market cap of only $397 million. It has a PE ratio of 0.8. The banks should be fighting one another to LEND money to the company.

 

[sting]

Make or break time... TRADING HALT.....

Lets hope we dont have to wait until friday, my heart couldnt stand the strain.

Sach has pulled out of CER lets hope it isnt an omen. Fundamentally I still believe this mob are a sound ongoing concern, but pity like all market prices hearts, panic and underhanded manipulation rule over good business sense.

SEMPER UBI SUB UBI

 

[Lavender689]

Trading halt until the earlier of the commencement of trade on Friday or the release of the announcement.

I reckon they are just trying to get the local banks' approval to share the WestLB loan on a pro-rata basis, and for a period that is likely to be till Sept 30, 2008 or earlier, pending sale of certain assets to repay the loan.


From a lending prospective and especially in today's environment, despite the strong cash flow of CNP, banks tend to be more conservative in their approach. What is important for a credit person is that they don't lend more than their fair share/offer better terms to the borrower than other lenders, this is especially true under the current environment.

The fact is that banks don't increase their exposure to a troubled company unless they have to, eg. tide the borrower over temporary difficulty when the prospects are good, like in this case with CNP.


I think, they knew that West LB is not going to extend even after the EU rescue probably yesterday or the day before, and they are just trying to finalise the allocation of loan amongst the local banks and get their credit's approval.

 

[nioka]

Make or break time... TRADING HALT.....

Lets hope we dont have to wait until friday, my heart couldnt stand the strain.
SEMPER UBI SUB UBI

I doubt if we will have to wait until friday. I would suggest the announcement will be made some time today and the trading halt is to give investors a chance to think about their current buy and sell orders. One way or another I'm expecting a bank decision this time.

 

[Lavender689]

One important lesson I learned from the recent share price movements of CNP is that, it is generally right to believe that there are leakages of insider information to the market, especially when more traders are individuals rather than institutional investors (i.e. the price and volume swings are not going to be that apparent.)

The notion that "the market is right" has a lot of relevance here.
I should have sensed that earlier - on Friday's afternoon trading session especially 3:30-4:10pm when the price slipped quickly all of a sudden.

Anyway, it is a learning process for me.

Cheers,
L

 

[tulasi74]

I agree there are leakages. Monday morning trading thought was high volume and above the 50 cent mark.

I just noticed that around 500k shares were removed from the bid volume. The signs are not good. Hope they don't take too long to make an announcement.

 

[propergeez]

Again this is not a quick trading halt and then announcement, which is the way it should be. This means that they are probably still negotiating - down to the wire.

Not good considering they have had extension upon extension. If they receive another short term (week) extension today I expect the stock will free fall to the low .4's or .3's.

 

[Lavender689]

From what we've been informed so far-i.e. most banks have agreed to the extension till Sept 30, 08, I don't see much chance of a one week extension for the whole debt. Even if it is, due to the tight timeframe for finalising the final documentation, I am sure that they will make that absolutely clear in the announcement.

However, depending on the availability of assets to be sold at reasonable price, and the time frame, I do think that there are chances that the AUD200mln loan of the dissenting German bank - WestLB may be extended for a period shorter than the c. 5 month of the remaining exposure. This is based on my work experience and from the prospectives of lenders to problematic borrower.

In view of the above, I don't see there being much likelihood for share price to go down to below 40c. Again, this is my personal opinion only.

 

[Lavender689]

Wall Street Journal Article from another forum:

The positive side is that apart from WestLB, which is believed to have security over its exposure, the other local banks are believed to have agreed to an extension till Dec., 15. Sounds reasonable, doesn't it.

I don't see the likelihood of CNP going into receivership/bankruptcy court at all. It is more likely that the West LB exposure will be financed out by the remaining lenders.

-----------------------------
"I saw this on HotCopper this morning (not sure if I'm allowed to post such articles from other forums - if not, sorry mods). Sounds pretty good:

WSJ(5/7) What's Brewing In The Real-Estate Market
07/05/2008 9:58AM

From THE WALL STREET JOURNAL

[What's Brewing in the Real-Estate Market]


Centro See-Saw

Shopping-center owner Centro Properties Group, which needed to secure its fourth repayment extension on $4.9 billion in debt by Wednesday, had to grant one of its lenders a mulligan to do so.

Centro, which owns roughly 680 shopping centers in the U.S. and 130 in Australia, was on the verge of getting a 7 1/2-month extension when one lender balked two days before the April 30 repayment deadline, people familiar with the matter say. German bank WestLB, which holds less than $200 million of Centro's debt, had just received a $7.8 billion bailout from the European Union and wanted more time to consider the deal.

The banks then granted a seven-day interim extension to resolve the matter. In a deal expected to be announced Wednesday, the banks have agreed to extend the deadline to Dec. 15, according to people familiar with the talks.

The catch: WestLB gets to revisit its decision late this month or early next, once again examining data that Centro will provide it about its operations, these people say. If WestLB elects to bolt from the extension, it could mean that Centro or the other banks will have to pay its claims or that Centro will end up in the Australian equivalent of bankruptcy court. Both Centro and WestLB declined to comment.


-- Kris Hudson, Alex Frangos and Lingling Wei "
-----------------------

 

[wildkactus]

I suppose a lot of weather CNP gets it's extensions or new loans would be down to weather the banks need the cash to keep themselves afloat.

I would think that it would be better to keep CNP going and have a better chance to get all the Loan money back after this credit crunch, then fire sale off the properties for a less then market return.

But we will see shortly I guess.

 

[Lavender689]

I reckon, more likely than not, some of the banks with exposure expiring April 30, have longer-term exposure to CNP as well. Hence, it makes sense for them to tide CNP over the current difficulties and get better recovery later on.

The key things are that: (1). cash flow is still sound and able to pay interest at least;
(2). from the banks' prospective, lending to property trust is meant to be viewed on a long-term basis. Economic cyclicalities are just the nature of the business. That said, we note also that CNP's retail properties are mostly for more defensive food and groceries retail, which are not so much so subject to cyclicality compared to Westfield's properties that are mostly for discretionary spending of consumers.

This is why there was news report that Westfield has planned to double its construction investment in retail property this year.

It may well be that CNP will request WestLB to extend their AUD200mln for a short term, to allow them to either get it refinanced by other banks, or repay WestLB via asset sale.

In a nutshell, the obstacle caused by WestLB, which is understandable from WestLB's prospective is not going to reverse the overall trend of extension, even more likely than not until Dec. 15.

Legally, it is not difficult for WestLB to agree to a short-term extension for their exposure, as they have charge over security, which they can liquidate for repayment (this is under the premise that the security is sufficient to cover their exposure and related costs, which I believe is the case here).

I reckon also, WestLB will also take into account client relationship aspect in making their decision, despite the understandable situation they are in at the moment.

 

[Lavender689]

West LB secured loan of c. AUD200mln

I reckon, AUD200mln is just a minor amount in the whole scheme of things. More importantly, the loan is secured.

If the remaining banks were to refinance this loan on the same basis, i.e. secured, and supposingly West LB's security more than covers its exposure. It is not a difficult decision for the remaining banks to make.

It is just a matter of time to finalise the approval and documentation.

I am very positive that the announcement will be good, especially considering report that the other banks have agreed to extend to Dec. 15.

Cheers, L

 

[Nathan_b]

from what i gather i belive something is inthe bag, have heard leaks of all different roumors but the best of all the Westlb trouble isnt centros problem, its westlb's. so they either need to pass the debt on or keep the lending. the money is unsecured debt. so if they wish to appoint administrators they can join the que with shareholders first.

 

[Lavender689]

Are you sure that the WestLB loan is unsecured? I was of the impression that it is secured.

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[Nathan_b]

look at their half yearly reports.

it is unsecured...

could be the magic link ey?

i would love to see this feller trade today with ann before close, but from speaking with centro, this ann is going to have a lot of info in it and will need time to digest, what i can report is ANN is 100% today.

 

[Lavender689]

Thanks, Nathan for your clarification. I agree with you that there should be a lot of info in the announcement expected to be released today. It must be carefully worded not to cause significant swings.