Corporates: LLC, IPL, TSE

Sydney, Nov 17, 2008 (ABN Newswire) - Lend Lease CEO, Greg Clarke is leaving the company in June next year, but he reckons the company is in a good position to survive the deleveraging pressures in global and Australian markets.

He reckons the UK is heading for a once-in-a-century economic slump, conditions are bleak in the US and even Singapore, but he is optimistic that Australia can weather the credit crunch.

Speaking to ABC-TV's Inside Business yesterday Mr Clarke said the ongoing global financial crisis was having its worst impact outside Australia.

"I am very optimistic about Australia," he said. "I've been here nearly five years and the strength and resilience of the Australian economy - nobody really appreciates it, who spends most of their time in Australia.

Lend Lease last week updated the market on its 2009 earnings guidance and it wasn't pretty: earnings down, but not as bad as the likes of Mirvac, or GPT. 

The company is taking a few hits in the UK as the commercial and residential property market tanks.

Lend Lease has dropped plans to sell its 50% stake in the King of Prussia shopping centre in the US because of the poor market conditions. Basically no buyers and no credit for any interested parties.

The US's second biggest shopping mall operator, General Growth Properties is a basket case, the shares down more than 99% this year and doubt about whether it can rollover almost $US1 billion in debt next year.

Centro Properties and Centro Retail Trust, the Australian group with significant mall assets in the US, is on its knees and will fail by December 15 if it can't convince increasingly sceptical banks to extend credit lines.

Lend Lease wrote down another $490 million in asset values last week and indicated that without asset sales, it might report a bottom line loss for the 2009 year.

Yesterday, Mr Clarke told the ABC "If you go around the world like I do - I spend 60 to 70 per cent of my time on the road outside of Australia - if you go around London or Berlin, or even Singapore and you go to New York, I was in Boston, Chicago and LA last week, and it's very, very, very, bleak.

"It's going to get tougher here, but I don't think it's going to get as bleak as everywhere else. I think that the UK is going to see a once in a hundred years economic event. I think it's probably looking at two to three years of recession," he said.

"I think the UK was disproportionately exposed to the financial services industry. [When it] got out of manufacturing it went completely towards having a disproportionate share of its economy in financial services.

"So it's been hit very hard by the meltdown in the financial markets and it's paying for that now."

"Well there are two counter-veiling influences. "The first one is Australia has a phenomenally healthy economy. 

No one's forecasting a recession in Australia and we believe commodities will continue to be traded. People are complaining that China's fallen to 8 per cent growth rates. Well by global standards that's pretty good.

"The other side of that equation is people are off highly leveraged vehicles and the most highly leveraged vehicle in the world is the Australian household. It has world class high credit card debt, world class high property mortgage leverage.

"That's the huge problem I'm talking about. That's the flip side of the coin and if people can't service those property debts or those credit card debts that will cause the recession."

Incitec Pivot (IPL) snapped up more than $800 million, CSR is looking at whether it should get its hands on some and Transfield Services is still trying after a week. The dash for cash continues.

Shares in CSR Ltd were placed in a trading halt on Friday at the company's request, after it received a query from the ASX after the shares fell from $2.24 on November 5 to a low of $1.75 on Thursday.

In its reply, the company said it had asked for the suspension while it reviewed capital management initiatives to strengthen its balance sheet.

It said it wasn't in a position to announce any of the initiatives and asked for the halt to remain in place until today.

CSR shares Thursday closed at $1.80.

CSR is looking to raise cash, like Incitec, Sonic Healthcare, Stockland, Mirvac and a host of other companies have done because the credit markets have shutdown and companies can't get or afford the meagre funds on offer.

Meanwhile maintenance and services group Transfield Services Ltd will move into its second week of suspension if it doesn't produce a capital raising today.

The shares were suspended last Monday, and that was then extended to allow it to work on a capital management initiative.

"The further trading halt is requested because Transfield is continuing work on capital management initiatives, which have been the subject of press speculation," the company said in a statement on Friday to the ASX.

Transfield shares last traded at $3.50 on November 7.

IPL raised $819 million through a share sale to its institutional investors.

Incitec said in a statement that it was seeking to raise a further $351 million from retail investors, for a total $1.17 billion, as it announced when releasing its 2008 earnings last week.

The company said that 90% of existing institutional holders (numbers of shares), participated in the entitlement offer, which saw around 327.6 million new shares sold at $2.50 each.

Incitec shares had closed at $3.74 on Thursday when the results and issue were revealed. Friday the shares fell 27.5% to $3.000, 50 cents above the offer price.

A non-underwritten Retail Entitlement Offer of approximately $351 million will be made, but the exact amount to be raised won't be known until small shareholders have put their hands in their wallets and paid over the money.

"We are very pleased with the excellent support the offer has received from our existing institutional shareholders," said Managing Director & CEO, Julian Segal said in a statement on Friday.

The new shares will rank equally with existing shares, but won't get the 19.5 cent final dividend.


 

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