After Centro's good news, a suit
Email Print Normal font Large font AdvertisementElisabeth Sexton and Carolyn Cummins
May 10, 2008
TWENTY-FOUR hours after Centro Properties Group struck a $2.8 billion deal with its banks to keep it afloat, a foreshadowed shareholder class action was filed in the Federal Court.
Late yesterday afternoon the plaintiff law firm Maurice Blackburn and the litigation funding firm IMF (Australia) launched twin suits against Centro and its associate Centro Retail.
The shareholders want to recover losses they say were caused by the Centro group's misrepresentation of how soon its borrowings had to be refinanced.
The statement of claim says the 2007 profit announcement and annual report by Centro Properties contravened accounting standards by saying its entire $3.6 billion in debt was not due to be refinanced for more than year.
For Centro Retail, the corresponding figure was $1.4 billion. In fact, $2.6 billion of the parent company's debt, and $600,000 of Centro Retail's debt, was short-term, the statement of claim says.
The shareholders allege misleading and deceptive conduct and breaches of the continuous disclosure laws.
They say Centro Properties failed to correct a June 20, 2007, forecast that its operating distributable profit per stapled security for the 2008 financial year would be 47 cents, an 18 per cent increase on the 2007 distribution.
It should have been obvious by August 9, 2007, that the forecast would not be met, the statement of claim says.
On that date Centro made a presentation to investors titled "Resilience for Growth".
The company had only until last December to refinance $1.3 billion of its $3.6 billion in direct debt, plus $1.4 billion in joint venture debt. By the same date Centro Retail had to refinance $1.2 billion in joint venture debt.
By August the two companies knew, or ought to have known, there was "a material risk" that the debt could not be refinanced in December due to the turmoil in international credit markets.
Members of the group are investors who bought Centro Properties securities between August 9 last year and February 15, or Centro Retail units between August 7 and February 15.
IMF said last month it expected the two Centro suits to seek $100 million each.
Yesterday IMF's executive chairman, Rob Ferguson, said the value of the claim had "increased materially" this month, but he did not say by how much.
A spokesman for Centro said the company was unable to comment until it had absorbed the detail of the claims.
Uncertainty continued to plague Centro Properties yesterday as investors hung on the sidelines awaiting further news about the group's refinancing program and a looming May 30 deadline.
After an initial flurry of buying when a two-day trading halt was lifted, which pushed the security price up 9.5 cents, or 20 per cent, to 56.5 cents, investors lost their nerve and the stock closed the week down 2c at 45c, while Centro Retail was down 1c at 47c.
Market reaction was expected to be stronger after Centro confirmed late on Thursday that had been given an extension to repay its mountain of debt to December 15, although that was contingent on meeting a number of stringent liquidity and inter-creditor arrangements by May 30.
Centro's chief executive, Glenn Rufrano, will next week start talking in earnest to buyers, many of whom are keen on cherry-picking his key assets.
---
Add to My Watchlist
What is My Watchlist?