Bloomberg News

Centro Improperly Shifted Money in Reorganization, PWC Says

November 25, 2011

Nov. 24 (Bloomberg) -- Centro Properties Group, whose shareholders and debt holders approved a reorganization plan wiping out A$2.9 billion ($2.8 billion) of debt this week, improperly transferred A$100 million, putting the whole plan in doubt, the accounting firm PricewaterhouseCoopers LLP said.

“The distribution of money is so tied to the scheme that if there is a problem with the distribution, then there’s a problem with the scheme,” PricewaterhouseCoopers lawyer Richard McHugh said today at a Supreme Court hearing in Sydney, where Centro sought approval for the plan.

A decision by New South Wales Supreme Court Justice Ian Barrett not to approve the reorganization would likely push Centro, which has A$2.9 billion of debt maturing Dec. 15, into receivership while shareholders in Centro Retail Group, who are to receive 15.9 percent of a new reorganized company, would face an uncertain future. The hearing on PWC’s objection continues tomorrow.

“If as a result of the course that PWC is taking, the court does not approve the schemes and Centro is forced into receivership, this would prevent our shareholders receiving any payment under the scheme,” Centro Property Group Chairman Paul Cooper told security holders at a Nov. 22 meeting in Melbourne.

The Nov. 22 votes by security holders averted liquidation, with investors approving the plan to cancel debt and pool assets into a new real estate trust with A$4.4 billion of Australian shopping center properties.

U.S. Buying Spree

The vote resolved a four-year battle to stave off bankruptcy after a $9 billion U.S. buying spree between 2006 and 2007 backfired as the subprime mortgage crisis triggered the worst recession since the Great Depression.

Centro transferred A$100 million from a trust account, which was to have been reserved for senior lenders, to a new trust that allocated A$48.9 million to security holders, A$21 million to convertible bond holders, A$20 million to hybrid bond holders and A$10 million to contingent creditors that include PWC, McHugh said.

The case is In the matter of Centro Properties Ltd. 2011/00283647. New South Wales Supreme Court (Sydney).

--With assistance from Nichola Saminather in Sydney. Editors: Terje Langeland, Suresh Seshadri

To contact the reporter on this story: Joe Schneider in Sydney at jschneider5@bloomberg.net

To contact the editors responsible for this story: Douglas Wong at dwong19@bloomberg.net;


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