Here we go again - Court may not approve deal tomorrow.....Ben...

Here we go again - Court may not approve deal tomorrow.....


Ben Butler
November 23, 2011
Centro Properties Group Extraordinary General Meeting.

Yesterday was a marathon day of meetings of Centro Properties Group shareholders. Photo: Paul Rovere

THE accountancy giant PricewaterhouseCoopers has mounted a legal bid to strip long-suffering investors in the stricken Centro property empire of the 5¢ a share they are set to receive under a merger deal approved yesterday.

After a day of marathon meetings, Centro Properties Group (CNP) shareholders and Centro Retail Trust securities (CER) voted to approve the complex deal.

The scheme of arrangement is designed to create a new $3.4 billion property trust, controlled by Centro's secured creditors, about 90 hedge funds.
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Under the deal, investors in CER are to end up with about 15 per cent of the merged entity, while CNP investors are to receive 5.03¢ a share in return for walking away from the group.

The deal was supposed to put an end to four years of pain for Centro investors, who have endured a crippling debt crisis that repeatedly threatened to push the company into administration.

But PwC, Centro's former auditor, has told a court the payment to CNP investors is artificial and contrived, asking whether the company's directors have properly discharged their duties.

The accounting firm has an interest in the outcome of the merger because it is a party to class action litigation brought by shareholders against Centro over its near-collapse in 2007 under a multibillion-dollar mountain of debt.

If the merger goes ahead, CNP shareholders are to receive $49 million, and $10 million of a $100 million pool has been set aside to pay ''contingent costs'', such as the class action.

Yesterday, in the NSW Supreme Court, Judge Reg Barrett said PwC should be allowed to argue against the deal at a hearing tomorrow.

''PwC's general apprehension is to the effect that the directors of CNP, in promoting and pursuing the schemes, may be found to have acted for purposes that are impermissible,'' he said.

A PwC spokeswoman, Lisa Jervis, said the firm had been flagging ''apparent issues'' in the scheme with CNP since August, but the company had ignored them.

Meeting in Melbourne yesterday, CNP investors gave grudging approval to the merger, with one urging his fellow shareholders to ''stick the bullet in the company''. Investors have seen the value of shares in the company collapse from a peak of more than $10 in 2007 to just 4¢ on Monday.

Including votes held by chairman Paul Cooper, yesterday's vote ran about 90 per cent in favour of the three resolutions needed to put the scheme in motion, although only about a third of shares voted.

''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,'' Mr Cooper said.

He said the group had a ''fallback'' position under which the CER part of the plan would proceed as planned.

Read more: http://www.smh.com.au/business/complex-centro-deal-challenged-20111122-1nssw.html#ixzz1eTkyRWH7