due for a big run, page-5

CNP is the second largest shopping centre owner in the world. The cash flows were great even during the GFC. The main problem is debt. This is going to be addressed in the recapitalisation. Management know that once the GFC settles down asset prices will improve and the NTA will become positive. CNP has written down its assets by more that $5 billion in the last 2 years and even a small rise will add a billion to asset values.

I hope the recapitalisation proposal drags on for 6 months, so that matters settle down. CNP cannot have an SPP as debts around $10 billion and it would take too many shares. The good news is that if things recover, there would be no dilution from hybrid securities.

The best outcome would be for some cashed up buyer, who will buy in for the upside after things settle down. All CNP needs is an investor to put in $3 billion at $1 a share and sell some shopping centres worth say $1 billion. Then the banks will line up to renew the debt and those who want out can be repaid their debt. This will eliminate the insolvency risk for CNP and the SP would spike in line with future cash flows from a solid business and on expectation that in time the shopping centre prices will improve. If the insolvency risk is gone, Centro could be valued at $5 atleast bsed on future cah flows.