CNP 0.00% 4.0¢ cnpr group

ive been a little busy

  1. 3,230 Posts.

    did anything happen while I was away?

    I had a few moments on my hand to pen a few words.. and here they are:

    Well, hasn’t it been exciting so far!!

    Bankers in the US extend out $1B in debt till the end of September and the Aussie banks give another two months grace on $2.5B.

    Well, Ill start off by saying that interest rates in the US are on the way down. The next Federal Reserve rate announcement is March 19th and the one after that, 30th April! Expect another 0.5 to 1% cut between the two which will be doing two things… reducing expenses for consumers in the US (stimulating expenditure outside of mortgages) and reducing costs for debt laden corporations…like CNP.

    Now that will be in the order of 1.75 to 2.25% changed to base rates since this all kicked off in December.. and we were worried by a 1.2% increase in CMBS rates? Hey US government..If you fund it they will come.

    For example, lets say there should be heaps of worldwide deposit funds looking for a little Australian interest rates type of return (3% differential at least? between the US and Australia) and so.. I think the Aussie banks are going to be told.. thanks for nothing...we’ve got the money elsewhere, reasonably soon.

    Now of course, its going to be the half-yearly report that underpins all this refinancing and that comes out next week.

    The company continues to advise that conditions are strong and that cashflows are in place. The only “guidance” has been that they wont give guidance on a dividend. Well they’ve already kept $170M from December, and each month they retain another $25M in dividends, so by the end of April there will be $270M less net-debt equivalent ($340M in a full year).

    Now if I had $4B on a interest only loan at 8.5% Id be paying about $340M a year in interest, so even if I only had Centro’s divvies to claw back, Id be covering those interest payments, let alone the fact that Id been paying them out of cashflow from my properties that were earning 6%, but lookee… last years interest payments were only $190M… hmmm is that the equivalent of 4.95%?

    So.. Centros’ shops of $6B worth ($4B debt plus $2B equity) at 6%.. that’s $360M, plus a percent or two on $16B under management, that’s $200M gives me well… in last years annual report EBIT was $520M, from that coming interest of $190M and divvies of $330M.

    So.. no divvies and current market conditions means that Centro could cover its debt at the equivalent of 15%!!!!

    Occupancy rates in shops are still 95%-99%, the syndicates, which comprise the FUM, are covering their expenses and so no loss of capital there, and there are the cash cows of the business pumping funds into the REDUCTION of debt.

    All this while rates are going down most places round the world, and particularly where it counts for Centro.

    The last example Ill put in is that while the Aussie properties have disproportionally most of the cash flow, the debt will be most disproportionally in $US, and which way are exchange rates going?

    I don’t expect any of the properties to be sold. I think that the only way that someone is going to get hold of them is to buy the company holus-bolus. Any discussion on “litigation” is also a furphy. The only ones bashing the stock have been the media, and HC posters. The debt situation was clarified in September and the company halted during the December negotiations which from what I read, went from.. everythings cool with a day or two to go.. to up the creek. That will be the answer I suggest to the need for any “defence” from ambulance chasers.
    I also believe that the PWC comments as reported are out of context as most reporters are wont to do in chase of a story. i.e PWC saying its time to review the accounts, and so we will.

    My idea’s are that the crash we’ve seen in the price was a combination of:

    1) Concerns on funding outcome causing the initial sell off (1/3 resolved, the rest now extended by 4 months since December, and extensions always are easier the second time round) and
    2) Selling because of the dividend suspension.. prompting
    3) Margin selling due to trading outside limits… (and there was a heck of that) including
    4) Indexers un-indexing their funds, followed by
    5) Corporate manoeuverings, the old 1084 and 1085 bots and
    6) Positioning for a potential rights or some other share issue for recovery.

    All combined to drive the price to crazy low levels.

    People who were conservative and held shares pre-December will still be holding. I’m sorry for those that paid $5, but I can forsee Centro at that price again, and it’s the dividends that count. If a dividend can be paid at the end of June, this is going to rock, but I don’t expect Centro to be a sole entity by then.

    If assets don’t need to be sold because the debt is refunded then there are suitors out there to purchase it all. Who says it has to be cash? In fact its more elegant and cheaper to use your own stock. The long termers will be rescued for dividends, the banks will be calmed and the transaction would be accretive on earnings from Day 1 to both the acquirer and the target.

    50c a share, $400M for Centro as a going concern is a joke. Bring on $3.50.

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