Looks like what a few of us are saying on this thread isnt too far off the mark
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"Centro has also warned that if approvals for the restructure of CNP's headstock debt and the proposed REIT amalgamation are not obtained it will work with the senior lenders to implement a transaction by "alternative means" and the $100m would not then be available for securityholders and others.
One alternative would be administration, which would probably lead to liquidation."
Market needs greater clarity and more detail from Centro Bryan Frith From: The Australian March 31, 2011 12:00AM
THE increasingly acrimonious dispute between Centro Properties (CNP) and securityholders who are challenging that the proposed $US9.4 billion ($9.2bn) sale to Blackstone of CNP's entire US assets does not require securityholder approval highlights how hazy, opaque and short on detail is the information released to date by CNP.
The ASX, or perhaps the corporate regulator, ASIC, should be seeking clarification to ensure trading in CNP is taking place on an informed basis, in line with CNP's statutory continuous disclosure requirements.
Top of the list should be clarification as to how much of the $100 million that CNP's senior lenders have agreed to provide to CNP securityholders and "other stakeholders" who are junior to the senior lenders in order to secure their approval of a proposed restructure of the Centro group is likely to flow to the CNP holders.
CNP did not name those other stakeholders but they are thought to include holders of hybrid debt with a face value of $1.05bn, convertible bonds with a face value of $500m, and possibly litigants who have a class action against CNP in relation to alleged breach of its continuous disclosure obligations.
Start of sidebar. Skip to end of sidebar. Related CoverageLegal move risks derailing restructure The Australian, 1 day ago Investor may take Centro to court The Australian, 2 days ago Centro baffled by price fluctuations Herald Sun, 5 days ago Clarity as BCI-Regent paperwork revealed The Australian, 6 days ago Alinta fate in securityholders' hands The Australian, 7 Mar 2011 .End of sidebar. Return to start of sidebar. A payment of $100m would equate to about 10c per security if the entire amount was to go to the securityholders.
Normally all creditors, such as the hybrid and convertible debt holders, and possibly the class action litigants, would rank ahead of the securityholders. In that event securityholders might receive little, if any, of the $100m.
Yet CNP securities are trading at 6c, which suggests the market is punting that securityholders will receive at least $60m, or that the senior lenders will be forced to sweeten the pot and provide more than $100m if it wants to buy the securityholders' vote.
The market may have it wrong, but if so it's arguable that's because CNP has not provided sufficient information to make an informed judgment.
Earlier this month Centro announced a restructure involving the conditional sale of the US assets, an amalgamation of CNP, Centro Retail Trust (CER) and other Centro syndicated funds to form a new Australian-style REIT with assets of $US4bn, and a complex swap in which CNP's senior lenders would swap their debt in return for virtually all of CNP's Australian assets and then inject those assets into the new REIT in return for equity.
CNP said that securityholder approval would be required for any transaction.
Normally investors in all the Centro entities involved in the amalgamation would expect to be offered participation in the new REIT but in this case it is not intended that CNP holders will be offered any participation. Instead, CNP's entire share of the amalgamation is earmarked for the senior lenders.
Another area requiring explanation is whether the cashflows of the US assets are "ring fenced", and thus cannot be distributed to Australia to help service the headstock debt of CNP. The Centro camp says previous announcements have made this plain, but disgruntled investors have been unable to find any remarks bearing this out.
Moreover, CNP directors should explain how it was in the interests of securityholders to obtain agreement from the ASX that securityholder approval would not be required for a major aspect of the proposal -- the sale of the US assets. It's difficult to see how the sale doesn't involve a change in the nature or scale of Centro's activities and/or the disposal of the main undertaking, both of which require securityholder approval.
The ASX accepted Centro representations that the US assets were not CNP's main undertaking. However on both gross assets and net assets it's difficult to see how that would be the case. After paying off US debt CNP will receive about $US600m from the the sale of US assets, which will be used to pay down some of the headstock debt. But there will be nothing left over from the Australian assets after the debt-equity swap with the senior lenders.
And while it seems clear the transaction would represent a significant change to the sale of CNP's activities, the ASX exercised its discretion not to require securityholder approval on those grounds. Many securityholders, including the Centro Shareholders Association, which speaks for more than 10 per cent of CNP are angered that CNP is not proposing to seek securityholder approval to the US asset sale.
One of those securityholders, Smartec, which is owned by Asian investors, has asked the ASX to reconsider its decision that securityholder approval was not required. Smartec considers that without the US assets CNP would be unable to survive and that is why the amalgamation and debt restructure is being proposed.
Smartec says only if the US assets are retained is there any prospect of a different arrangement in relation to CNP and the appropriate time to consider the proposal is before the "irreversible step" of selling the US assets is taken.
Smartec has also applied to the NSW Supreme Court for an order enabling it to inspect the books of entities in the Centro group. It says it wants to understand the basis for Centro's assertion that securityholder approval is not required, to check the completeness and accuracy of representations made to the AXX, the performance by the directors of their duties and the effect on the rights of securityholders through the constitutions of the CNP entities.
Depending on the outcome, that may provide a basis to seek a court order, under section 693C of the Corporations Act, to compel the ASX to comply with its listing rules.
CNP argues that CNP has negative NTA of $2.43 per security, but Smartec counters that's because the US assets have been written down by more than $US4.2bn over the past two years and that when values inevitably recover the assets will be revalued upwards and Centro should therefore have been able to arrange refinancing of its debt.
The Centro camp claims refinancing proved impossible because the hedge fund owners of the US debt were threatening to put the US operations into Chapter 11 bankruptcy unless the assets were sold.
Centro has said that the debt-asset swap will be by way of a creditors' scheme of arrangement, not a members' scheme, but that securityholder approval will be sought, in a way that has not yet been explained.
Centro has also warned that if approvals for the restructure of CNP's headstock debt and the proposed REIT amalgamation are not obtained it will work with the senior lenders to implement a transaction by "alternative means" and the $100m would not then be available for securityholders and others.
One alternative would be administration, which would probably lead to liquidation.
But it's said that consideration is also being given to proceeding with a creditors' scheme, without seeking approval, on the grounds that it's not legally required because securityholders are so far under water.
CER Price at posting:
34.5¢ Sentiment: LT Buy Disclosure: Held
