CNP - Centro Properties Group

Lavender, i have read this aswell....

boy i hope they are right, im very optimistic about this, i have heard from scources that this will be the case, but also had an inkling that there may be a nasty, which if what we are talking about is true and confirmed today or tomorrow (sure today tho) there should not be any nastys.

centro will release the detailed report that should be clear cut outlining there plans and the outcome in detail. that is what i heard confirmed by IS earlier on.

Thanks for the article Lavender but it doesn't exactly read correct. The last paragraph says refers to Centro announcement made last Thursday and but says that was this week. Second last paragraph said West LB is said to be resisting.

I have been following all the articles on Centro and the second third of the article looks like an article that was released earlier and doesn't actually appear to confirm information in the first paragraph.

Can you confirm if the information is all from one article or a number of articles?

tulasi,

the article was written and pates added to it when they get the news. its not all current just gets stuff added to it each time its updated.

Centro Properties Group, the Australian owner of about 650 US malls, halted trading in its shares as the Wall Street Journal reported the company may be granted an extension to December 15 to repay lenders owed $US4.9 billion of debt

here is the article: http://business.theage.com.au/centro-gets-debt-extension/20080507-2bxb.html

Extension till Dec, that means the share price should not dip any lower right?

we need an announce ment to confirm all of this.

otherwise sp may fall, i heard there may be an extension till 30th may then extension till 15th december.

lets just hope its all good and we get that nice detailed announcement.

Nathan,

Not sure where the May extension is from. However, I guess from reading the article on the Age re West LB to be opted out in June 08, it may well be that what you were reading were referring to that.

In my view, no matter it is a two-stage extension or a straight extension to Dec. 15, it is going to be very good news.

I presume we need to have full confidence that the longer-term extension will happen.

I was wondering if they release the news tonight, where will they be releasing it on? Was the previous 10pm release on ASX website?

I presume it is more likely tomorrow morning.

Pls kindly comment on this, I am not that familar with the rules for announcement well outside trading/business time.

Thanks, L

Lav,

will be on centro website.

yes the june thing is nicely placed in the news article.

a little birdy told me that there was going to be extension till end of may. if we get extension till end of may, i think it will be iminent fall in price. people are expecting september min, may extension will show uncertainty.

if it extends till decmber with june review that sounds really good.

we just need to await the ann.

Just spent 1 hr looking for the time of the feb 15th ann.....

took me forever.

it cam out on www.centro.com.au @ 22:52 on 15th Feb 2008.

Theres still 1 + 1/2 hrs left till midnight.

Nathan,

Thanks very much for your hard work.

Let's just be patient and we shall get the announcement before trading anyway.

Re the May extension, I just think that if it is confirmed that West LB is allowed to opt out in June, and also given previous release that all the other banks have agreed to the extension, the May extension simply does not make sense.

The only possibility is that they temporarily extend it to end of May just to finalise the loan documentation. However, it would be made very clear that all the other banks have agreed to the extension, be it Sept 30, or Dec. 15.

I am positive, very much so.

Thanks, L

Nathan

Thank you very much for your response to my question on the article. That makes sense. I actually found the first half of that info on business spectator which is quoting from what is reported on Wall Street Journal online edition.

I have just read the article in the Age but cannot find the reference to May extension. It says West LB have been given the option to opt out of the extension if its not happy about data to be provided by Centro. That is rather curious because I would have thought Centro would have been making all that information available in the lead up to the April 30 deadline.

I think the announcement has not been made because the extension may not be in the bag. Given all the media speculation in the last few weeks and what has happened in the last seven days, I don't think anyone in the media reported about the snag caused by one bank before the event. It was all after the event. There has been talk about a Dec 31 deadline, then weekend financial review had 12 month extension, there was a comment by the CEO saying if they were given 12 months it would be ideal. I wouldn't be surprised if the extension is actually for a full 12 months as Dec 15 deadline is too close to Christmas and if they were going to extend to there, they might as well extend the full 12 months and give Centro a lot of breathing room.

When Feb 15 deadline was extended and it was in the bag, the announcement was made on Friday 12th February and my initial reaction was that it was positive as it included a provision that US banks had essentially given a Sept 30 extension subject to Aus banks agreeing to the same. The SP did not see much appreciation because the news was also accompanied by a restatement of more long term liabilities to short term liabilities and it increased the mountain of debt that became due and payable within a short timeframe.

This time around if all the large banks have agreed to extend their debt to whenever, i.e. Sept 30, Dec 15, Dec 31 or April 30 2009 and only the 200 mln may be due and payable before that time and Centro has the option of using proceeds from asset sales or new equity injection to pay the 200 million, the surely the share price should see some significant appreciation. Not sure how many of you are followers of technical analysis but the bollinger bands on the daily charts have narrowed a lot and this suggests that a strong move is imminent but direction is unknown but if debt extension is confirmed the probability is that it will be up.

So Lavender, I agree with you that it is more likely going to be really good when the news eventually comes and those who have taken a punt should reap some reward for the risks they have taken.

Tulasi

In my earlier post I said when Feb 15th deadline was extended, they made the announcement on Friday 12th February. That was actually 15th February.

Not sure how much longer I am going to keep refresing the centro.com.au

Earlier there was mention of Sachs disposing of 15 million shares. Just looked in detail at the announcement and while this was done over a period between February and May around 8 million was sold between 29 April and 2 May. Hopefully they were just doing something that I once did which was to switch out of CER in favour of CNP because I felt that CNP had gone down more than CER in relative terms and therefore more likely to have greater appreciation in SP than CER.

Article in the Brisbane Times says that Centro have been given another 48 hours to finalise documents with bankers and that they are expected to secure an extension to December 15.

The interesting thing about the article is a suggestion that part of West LB's concerns are to do with CNP's ability to service their debts. I interpret service their debts as relating to their ability to meet the costs on borrowings, i.e primarily interest plus any costs involved in negotiating these expenses. This is something I raised a while back where I said that in their last financial statement showed an operating loss even after the asset writedowns were excluded.

It will be really interesting to see if they disclose any information on how much the extension is going to cost them in the way of increased borrowing costs given the increased cost of borrowing these days.

Dec. 15 extension seems to be set now, an inital 48-hr extension to finalise the documentation. WHich is just to cover legal requirements.

Don't panic at all!


TOP News
Centro to get Dec 15 debt reprieve 5:15 AM

The Spectators

Centro Properties Group has been granted a seven-month reprieve until December 15 to repay $5.7 billion in debt, The Wall Street Journal has reported in its online edition.

The troubled owner of close to 700 US shopping malls, currently in a trading halt, is close to securing its fourth repayment extension from German lender WestLB, which holds $200 million of Centro debt, sources told the paper.

The reprieve would give Centro more breathing space to proceed with its program of asset sales, in order to placate its US and domestic lenders and avoid being placed in receivership.

Under the terms of the deal, WestLB will revisit its decision later this month or early next month after Centro provides more data on its operations, the Journal said.

If WestLB is unhappy with what it sees, it can revoke the extension and Centro would be liable to immediately pay down the debt.

WestLB is believed to be the “local” lender that was holding out on approving Centro’s request for a five-month extension to refinance its domestic debt.

Centro is expected to annouce a 48 hour extension on its debt refinancing deadline as its lenders finalise a more lengthy extension, The Australian Financial Review reports.

Hey Lavender

I am not panicking at all but I am being realistic about what the Dec 15 actually means and the effect it could have on the share price.

I started looking at Centro in December after the crash and got sucked in by the move from a low of 46cents one day to a high of 1.495 the next two days.

Recently when it looked like they were going to survive and the debt deadline was going to be extended for long period, I anticipated huge rises in the share price similar to December and it did not happen.

I am just putting those posts that don't paint a very bright picture because that is the reality of the business. The Dec 15 extension means they have longer time to work out if they can save the business but it doesn't change the fact that they still have a hell of a lot of debt in their books and debt costs have been rising which will reduce their operating profits and given the size of their debts, put them into an operating loss situation. In effect, shareholders get nothing and banks get everything in effect from their revenues.

If they are unable to reduce debt and banks pull the plug, the question to ask is whether the shareholders can get anything from what is left of shareholders equity. If you look at their balance sheet, net tangible assets is $1.35 per share as per last financials and they have roughly 845 million shares on issue. That works out to be $1.14 bln in net tangible assets and this equates to roughly 4% of total assets of $25 bln. What this effectively means is that potentially a small decrease in asset valuations can have a significant impact on shareholder equity and can wipe it out.

Banks have no doubt given the extension because they know that if their loan is unsecured, they have to share the spoils with shareholders and if they force centro into a fire sale scenario, they will potentially lose more than if they allowed them to sell assets in an orderly fashion and in the meantime milk all the revenues from the business.

Centro's best bet is what was suggesting in a Business Spectator article last week, i.e. try to find new equity by creating new syndicates which can hold the best assets of their Australian Wholesale Fund and they retain 50% ownership funded by bank loans and remaining 50% funded by new investment which can be used to reduce debt. Thankfully all their MCS syndicates have had great returns in the past but it must be remembered that given the higher cost of borrowing, the new syndicates will not have the same rate of return and it will be hard for them to attract new investors to their syndicates especially as their reputation has been tarnished by what has happened in the last 5 and half months.

These I just my thoughts on the issue. It doesn't mean that I have it right. Despite knowing all this, I am a gambler and took a punt and bought more shares last Monday.

Hi Tu,

When I say don't panic, I mean this time 48-hr extension is just to allow them time to finalise legal documentation for longer-term extension. Not like last time when there were still a lot of uncertainties around.

I agree with your analysis. However, at this stage, the key issue for CNP, technically is survival. Certainly, interest rates are higher, and they are paying penality rates for the extension, this is just normal banking practice for companies in trouble. Once they reduce their leverage by ideally raising equity, or selling assets at more reasonable price as the property price recovers, they will not be paying such high interest rate anymore - I mean they will gradually be in line with the other property trusts in this market.

The positive note also is that the retail property sector here is still performing well and has good prospects, this is evidenced by Westfileld's recent plans to double its investments in retail property construction.

Once they get over this period of difficulties, they will be fine. This is why the banks are willing, though also have to extend the loan. Property price ups and downs are just part of the nature of the biz, it was just exagerated by the US subprime mortgage crisis.

In summary, at this point it is a matter of survival, and then they will gradually return to business as usual/normal.

thanks, L

Hi Lavender

Thanks for your response. Yes I misunderstood what you meant by panic.

I agree with you that survival is key here and I am really, really glad they have been given the opportunity to survive. My exposure to CNP is huge. Unfortunately I have a day trader's mentality and find it very hard sometimes to sit on shares for the long term and hence have missed out on a lot of good runs.

Am hoping to reduce my exposure significantly soon but have had to scale down my expectations with the news of the higher borrowing cost and take what I can.

Good luck to you and all other CNP punters out there.

Tulasi

Problem is now there are day traders playing all sorts of games on this poor share. it can bounce really hard, and i also been very let down by outcomes and SP reaction.

It appears this is true, as far as extensions go. I belive that Westlb have requested for the debt to be secured as its currently unsecured.

This will be Positive on SP IMO.

There should be some announcement this morning, perhaps just at 10am. Remember the Age article did mention that there will be an announcement before start of trade on Thursday. Also businessspectator.com.au article mentioned an 48-hr extension to finalise the doc.

Unless something unexpected happened overnight, I don't see any reason why there should not be an announcement.

Just a question here, what are the ASX rules for announcement, do they have to release the info immediately after some price sensitive event has happened, or is there a time lag, say 1 day or 2 for them to make the announcement?

It sounds like the midnight last night announcement deadline believed by some was not correct.

Just for our knowledge, could anyone pls kindly clarify on this for all of us?

Thanks, L

They can take their time in the THalt.

i am thinking when there reporting the 48hours that the jurnos are refering to a trading halt.