(Adds details of class action lawsuits in fifth paragraph.)
Nov. 25 (Bloomberg) -- Centro Retail Trust, the listed unit managed by Centro Properties Group, plunged the most in almost 2 ½ years as a court put off a decision on the group’s restructuring plan after a challenge by its former auditor.
Centro Retail shares slumped 14 percent to 27 Australian cents at the 4:10 p.m. close of trading in Sydney, the most since June 2009. Centro Properties has been suspended from trading since Nov. 23.
The New South Wales Supreme Court today adjourned without approving or rejecting the group’s plan to erase A$2.9 billion ($2.8 billion) of debt and create a new property trust, after PricewaterhouseCoopers LLP challenged the proposal. The accounting firm alleged the money set aside under the plan to pay Centro Properties shareholders, who wouldn’t own any part of the new trust, should have been retained to pay contingent creditors, who rank ahead of equity holders in a default.
Centro spokeswoman Marjan Doroodkar didn’t immediately respond to a voicemail message seeking comment.
Centro Properties, Centro Retail and PricewaterhouseCoopers are facing class action lawsuits from former investors who alleged the companies and their auditor misled them and the stock exchange about the full extent of both groups’ maturing debt obligations and their ability to refinance them, and the risk that they may not be able to support their profit forecasts.
‘Very Significant’ Claim
Payouts related to class action lawsuits faced by Centro and the auditor could exceed the A$10 million the company had allocated for contingent creditors in the plan, Richard McHugh, a lawyer for the firm, said today at the court. The company shouldn’t have allocated A$49 million for shareholders when it had a “very significant outstanding claim,” he said.
Share and debt holders of Centro Properties and Centro Retail this week approved the restructuring, which will give senior lenders control of the new Centro Retail Australia trust in exchange for forgiving the company’s debt maturing on Dec. 15.
Hedge funds who’ve bought Centro’s debt from its original lenders would own 72.3 percent of Centro Retail Australia. Centro Properties investors would get 5.03 Australian cents for each security they own. Holders of hybrid securities would receive A$20 million and convertible bond holders A$21 million, it said. The rest would be set aside to pay other creditors.
The court has reserved its decision and the hearing was adjourned until a date still to be decided, Centro Retail said in a regulatory filing.
--Editors: Malcolm Scott, Andreea Papuc
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