CNP - Centro Properties Group

simontitan said:

This week might prove the make or break it would seem. Been watching since price dived months ago.

Still very tempting though

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Looks like it is more break than make with today's news that Centro will not raise sufficient funds from sale of properties and are having trouble raising new finance. I'll admit that Centro are proving to be one of my mistakes and I have sold out today as recognition of that. It may be a day trading stock if the situation arises but it is in the past as a long term hold for me.

nioka said:

Looks like it is more break than make with today's news that Centro will not raise sufficient funds from sale of properties and are having trouble raising new finance. I'll admit that Centro are proving to be one of my mistakes and I have sold out today as recognition of that. It may be a day trading stock if the situation arises but it is in the past as a long term hold for me.

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Nioka

I am a bit confused by your post. Are you saying you have sold out or that you are holding it as a long term hold?

I have to agree with you that this is one of my biggest mistake. A mistake I compounded recently by buying more on expectation of a good announcement on sale of CAWF properties.

While today's announcement was viewed negatively by the market given the high volume and dip in share price, I actually think it was quite a positive announcement. For a while now, I have held the view that the only way Centro can get market value for the properties that they are trying to sell is if potential buyers do not offer them prices that are a forced sale price. If they are meeting interest costs and partially reduce debt while maintaining revenues, their capacity to meet interest payments increases and banks might be more willing than before to refinance the remaining debt for a longer period. The reason why they have mentioned hybrid securities is because that is the way banks can get exposure to future increase in share price which is bound to happen should a longer extension be granted. So I am actually viewing the announcement not as an admission that the company is in trouble but more that the company is starting discussions early to ensure their long term survival.

I read on afr.com that JP Morgan are forecasting profit of 158 million for Centro group. I don't know how to take this as they are one of the banks they would have information at hand on how the Company is progressing in terms of income and cash flow. If Centro have actually made a profit when they experienced higher cost on their debt, incurred adviser fees and litigation costs, it bodes well for the future.

I am still holding for 48 cents. Good luck to all that are still holding.

Tulasi

tulasi74 said:

Nioka

I am a bit confused by your post. Are you saying you have sold out or that you are holding it as a long term hold?Tulasi

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I have sold out. I was saying that my original idea was a long term hold but that is now past tense.
By the mention of hybrid securities I take that to mean something like convertable notes. These tend to have a high interest rate and a very cheap conversion price. The lender can't lose and if the company does OK and the loan is converted to shares it dilutes the shareholding of the earlier holders and prevents good gains. Meanwhile the profits are consumed by the higher interest rates.
I was wrong in buying. I was wrong in holding. Maybe I am wrong is selling today. ???????

nioka said:

I have sold out. I was saying that my original idea was a long term hold but that is now past tense.
By the mention of hybrid securities I take that to mean something like convertable notes. These tend to have a high interest rate and a very cheap conversion price. The lender can't lose and if the company does OK and the loan is converted to shares it dilutes the shareholding of the earlier holders and prevents good gains. Meanwhile the profits are consumed by the higher interest rates.
I was wrong in buying. I was wrong in holding. Maybe I am wrong is selling today. ???????

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Wow. Centro today hit its lowest price and you sold out. I admire your ability to take a loss. I recently did that with Minara and still regretting it as I went against my instinct.

I think a lot of traders read too much into the dilution and company's disclaimer that it can give no assurance that further extensions will be granted. Centro said the hybrid securities `may' affect current shareholders and that is true that it will affect equity value for existing shareholders. But the question is whether it will affect it in such a way to reduce the value beyond where it is now. I believe not and I am willing to keep holding for a better price that where the stock finished today. Having said that, it is possible the stock can retreat further to around 13 - 15 cent level and maybe that might be an opportunity for you to make some trading gains.

Good luck if you are still looking at it.

Tulasi

I bought more CNP today at .195. I have in the past seen it go down to .21 and not having bought regretted when the SP moved upwards so today I just decided to do it and have averaged down my total holding. I think I am happy with my decision and believe the SP won't go down further as the news today sounded negative thanks to the media it was just a conservative announcement of facts without any hype. The facts are not great but not desperate or dying either but worried depressed types might feel it was doom and gloom and sell out, thus the SP dived a bit as people got scared. Nothing really has changed all that much over the last few months except some sales of shopping centres etc will enable some debt to be repaid which is good. That is all the banks wanted to see I believe, that there was an effort to sell assets to repay debt and that is what is and has occurred. The next extension is not definite but it is being worked on, a much longer extension and as long as the interest payments are being met and the assets are making a good income and show profitability then I think CNP will be saved..

Stake in Centro may buy time from banks
By Ben Butler

August 26, 2008 07:43am

Shopping centre empire Centro is exploring giving bankers a stake in the company because it cannot find a cash injection.
Its shares dived 9 per cent yesterday after Centro revealed it had not received any recapitalisation proposals acceptable to its bankers and did not yet have a buyer for its Australian shopping centres.

Centro will now ask its bankers to extend repayment deadlines into 2009, but faces the prospect of billions of dollars of additional debt falling due if the company's crisis rolls on into a second year.

The company told the stock exchange it was in discussions with US lenders owed $US1.1 billion ($1.27 billion) by September 30.

It wants that deadline extended to December 15, the same date a $2.3 billion debt to Australian banks and a $US450 million debt to US noteholders fall due.

Centro told the stock exchange it was unlikely to find a cash injection before December 15.

With no realistic prospect of selling the company or going to the market for a capital raising, Centro said it might consider converting some of its debt into "some form of hybrid security''.

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NEWS.com.au, 7 May 2008 This would give its bankers a stake in the company, but further dilute the already battered equity of Centro's shareholders.

"Discussions with the lenders on possible terms are at a preliminary stage and no specific proposal has been formulated,'' the company said.

Options under consideration are believed to include a convertible note, which would pay interest at a lower rate than Centro's bankers now receive but be convertible into company stock.

Centro chief executive Glenn Rufrano is believed to be looking for a debt deadline extension of longer than six months -- possibly up to a year -- in a bid to ride out the effects of the credit crunch.

The message of management for the long term continues a theme Mr Rufrano established when he took management of the company from Andrew Scott in January.

At the time, he said the best option for banks was to stick with current management.

Mr Rufrano was not available for comment yesterday.

Centro's bad year started on December 13, when the company went into a trading halt after warning of "likely increased interest margins on some loan facilities the terms of which are currently under negotiation''.

has everyone given up on CNP? It is on the edge that's for sure and on the nose in the portfolio. What a disaster and nothing less at this stage. However who is holding still may be in for a great reward or big pain, its one or the other, whichever way the banks roll the dice - they are in charge now and themselves have a lot to lose if they pull out. If they do leave CNP high and dry they lose all the interest income on the enormous debt, they lose the possibility of repayment in long term and are left with bigger bad debt which they cannot afford to have. So what choice do they have, their options are tight as well and this gives the shareholders and CNP group a bit of hope.

I wouldn't touch this stock. If they do some sort of recapitalisation i reckon existing shareholders will end up with less than 5% of the company- making the shares pretty much worthless. Remember what happened with Pasminco?

tulasi74 said:

Wow. Centro today hit its lowest price and you sold out. I admire your ability to take a loss. I recently did that with Minara and still regretting it as I went against my instinct
Tulasi

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You sometimes have to take a loss or face a bigger loss. At least I am a few thousand up on what it would have been today. It may have a little more to fall yet, I may get back in if it gets near 10c. That could be a temporary bottom. but DYOR.

I am waiting to see what net tangible assets are as at 30 June 2008. If Centro were to enter into a hybrid security arrangement with banks, it would be better for existing shareholders if they did not fix a conversion price now.

The banks will be fully aware of what value the properties will get should Centro be put into an administration situation.

Even though they have a lot of debt, it must be remembered that not all the debt is due and payable now. I think a two year extension with the option of converting debt to shares at a later point makes a lot of sense for the banks.

The decision not to accept private equity was made in conjunction with banks. Why give private equity the opportunity to take up a stake in Centro at dirt cheap prices when the banks can do the same.

I think Centro will be given additional extension through the hybrid security option. CBA and JP Morgan already hold Centro shares and this provides them with a good opportunity to increase their stake at the expense of existing shareholders.

Happy to keep holding. If I lose it all, so be it.

Tulasi.

tulasi74 said:

I am waiting to see what net tangible assets are as at 30 June 2008. If Centro were to enter into a hybrid security arrangement with banks, it would be better for existing shareholders if they did not fix a conversion price now.

The banks will be fully aware of what value the properties will get should Centro be put into an administration situation. Tulasi.

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The asset that Centro has that the banks could destroy if they put Centro into administration is the management rights which Centro seems to be able to retain even if the actual properties are sold. That is the reason that I held centro for so long. Hard to value at this stage. (When I bought in at an average price of around 47c I was expecting a value of around 70c to be reached based to an extent on the value of the income from the management rights.)

Can anyone tell me the difference between recapitalising and restructuring ? Why does recapitalising mean our shares will be worthless? I would have thought that would increase their value, at least from current levels.

since I will be taking a big loss if I sell now, i might as well take the risk (its smaller than it was) and wait to see what happens as if it goes well I will be upset if I have sold out too soon. If it all folds up then my loss will be just a bit more than it will be if I sell out now. Its not significantly different as my uncrystallised losses now I have adjusted to psychologically and financially so the difference between crystallising existing paper losses and risking what is left, is not that much - so that is my reasoning for staying in until the end or at least until there is some certainty which way it is going to go. I have a vague feeling it will be ok but also know it may very well all crash to zero. I know a 'vague feeling' is not much to go on but I have gone this far so.....

However this will be my last risky investment, from now on only profitable companies and the next several months will show oodles of opportunities for solid investment and low SPs ... and I am ready for it and my aversion to risk is a lot more than it was and I won't be doing this CNP type caper again, that's for sure even if it all pans out well and I make good... whatever ... fingers crossed ...xxxxxxxxxxxx and toes

vida said:

Can anyone tell me the difference between recapitalising and restructuring ? Why does recapitalising mean our shares will be worthless? I would have thought that would increase their value, at least from current levels.

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Can I suggest that restructuring means selling assets to reduce the debt and recapitalising means raising more share capital to buy out the debt in CNP's case. Issuing more shares does not necessarily reduce the value of existing shares if the additional capital is used to reduce expensive debt or increase assets or income.

Massive buying in Centro today between 11.15 and 12.00 midday. Nearly 9 million shares and share price went up from 15.5 cents to 20.5 cents. I would hazard a guess that the buying would be a large institution probably with some inside knowledge of tomorrow's results.

I have looked at Centro NP's last filing and according to their financials they have net assets of 2.3 billion. This is the company which at last filing said their statements were possibly misleading. Having made those comments I would think that they would make sure their next filing was accurate.

I also looked at the revenue versus expenses. They made a loss but the loss was because of depreciation, reduction in value of real estate and goodwill reduced to nil. They still have net assets after all this. Their cash revenues exceed their expenses for the 3 months by 30 million. The reduction in value of real estate is about 3%.

At the report CNP filed in Feb 2008, they had net tangible assets of $1.35. This did not include goodwill.

I think Centro's financials are going to show that they are solvent but are only insolvent if they are forced to sell assets at fire sale prices. I doubt very much the banks would want the headache of dealing with an administrator that will charge through the nose when Centro are quite adequately meeting interest payments. If I were the banks, I would take a very long term view and take up the hybrid security offer. It will be extremely good value from a long term perspective.

I am expecting the share price to rally tomorrow when results are announcement. It has already started today.

I have been wrong before so please DYOR.

Tulasi

All the things you outlined in the post just before this one, have been what is relied on throught past year and justified us continuing to hold our investment in CNP and sometimes to top it up when the SP falls too low as it did this week. Yes all those positive elements are still there and have been all along but the huge debt and difficulties with repaying and refinancing it that is the tricky thing but the banks should extend the debt as they did before for the same reasons they did so in the past, those reasons remain and will probably underlie the company's survival into the future and leave some grateful shareholders in its wake. CNP must remain manager of the assets otherwise more value is lost and the banks cannot tolerate that so they will help support the company and see to its survival and will make money doing so - at least that is my viewpoint and of course I don't know everything and I haven't spoken to any banks about it, I just surmise from what we all know

I can find nothing new in the report from CNP. There is nothing in it that I can see changing the outlook at all. The fate is still in the hands of the banks and they will be acting in their best interest rather than helping CNP for "old times sake". CNP will probably get more time to restructure but I can not see any way that it will help the SP in the meantime.

The banks/lenders are likely to support the stabilisation/restructure etc and the announcement from CNP in fact says that that is what they think. Once this is made clear to the market, that there are extensions which go past September and December and are more longterm, the SP will rise I have no doubt about that. The current terribly low SP is a reflection of the uncertainty as to whether the company will survive up to and past Dec 08, once there are announcements saying it is not going to fold the SP will rise.
I think if there was any imminent danger of that the stock would have been suspended as it could not and should not be trading if that was the reality. Regardless of the sensitivity of its position and low SP CNP still trades, is solvent and business is doing very well. The debt it the issue....

All I see is a change of polarity. Maybe if it breaks back above resistance and finds support, etc. but otherwise the downward spiral continues. Even today's "bullish" activity wasn't that bullish, as there's rejection of higher prices.

So any expectations from someone good with numbers in the weeks to come? I hold, I would kick myself more for missing out more then for losing what I have in there currently. Come on CNP.