CEC has pulled out of a $120 million joint venture with developer Consolidated Properties after deciding to go it alone in its bid to reduce the company's debt.
Just four weeks after it announced a deal with Consolidated (wholly owned by listed developer Trinity Group) to build homes on 8000 blocks of land in Cairns, Townsville and Mackay, CEC dropped a bombshell yesterday saying it believed there was greater shareholder value in selling the land in its own right.
At the same time, the cash-strapped construction company announced it was selling land worth $44.7 million and had begun negotiations for the sale of "other non-core property" valued at $32 million.
Central to the sell-off, which CEC chief executive Roy Lavis said was not a fire sale, is the company’s $100 million-plus debt. In its March accounts, CEC listed debts of $134 million and cash of just $1.5 million.
It is believed the decision to pull out of the joint venture relates to the need to satisfy its major lender, the Commonwealth Bank, with substantial loans falling due soon and the company failing to make inroads into promised debt restructuring.
In a statement to the Australian Securities Exchange yesterday, CEC said the sales of $44.7 million of property in two separate deals were due to settle on May 31 and a further package worth $32 million was due to go unconditional by May 31, settling around June.
Mr Lavis would not identify any of the properties being sold, but hinted that non-core assets such as the company's two depots (Cairns and Townsville) and its Southgate Service Centre on Ray Jones Drive could be sold and leased back.
The moves shocked Consolidated, which had met all conditions of the non-binding agreement announced on April 8.
Consolidated’s Cairns consultant, Gerard Obersky, said his company was committed to "doing the deal" and had delivered on the heads of agreement by the May 1 deadline.
Mr Obersky said Consolidated had invested a "considerable amount of resources and a huge amount of money" in going ahead with valuations and other aspects of the joint venture.
The moves have pleased the stock exchange with CEC stocks adding 6c yesterday to close at 65c after trading at 72c.
