BREAKFAST DEALS: Centro snag

Centro's proposed restructure hits a legal snag as the property group's former auditor, PricewaterhouseCoopers, raises objections at the NSW Supreme Court, which may derail the timetable for the $3 billion debt-for-equity deal. Meanwhile, the tussle between ASIC and Fortescue chairman Andrew Forrest looks set to stretch into another round but Fortescue's shareholders probably have bigger things to think about, and former Leighton Holdings boss Wal King nabs one of the heftiest 'golden handshakes' in Australian corporate history. In other news, the Australian Council of Superannuation Investors takes aim at News Corp's credibility, and Macquarie Bank is revealed as the latest suitor to join the fray for Redcape Property Group.

Centro, PricewaterhouseCoopers

Centro's plan to begin life as a brand new trust has hit a new legal snag with the property group's former auditors, PricewaterhouseCoopers, joining class action claimants in opposing the scheme set out by Centro's senior lenders. The scheme was before the NSW Supreme Court for approval but with $167 million at stake, PwC and the other contingent creditors don't seem to be in a mood to give up without a fight, despite the prospect of Centro Properties being put into administration. Under the terms of Centro's proposed restructure, all of Centro's external senior debt – worth $2.9 billion – will be extinguished and the group will have no substantial assets other than a cash sum of up to $100 million to be shared between shareholders, hybrid debt holders and junior creditors. The carve up of that $100 million will see PwC and other contingent creditors only get $10 million and that's got them hot under the collar given their claims that they are owed close to $177 million and with question marks around Centro Properties' solvency, creditors should rank ahead of shareholders and other note holders. PwC's objections should be broadly echoed by the other class action claimants and if the court decides to rule in their favour, then the December deadline for the restructure could be put in jeopardy and potentially tip Centro Properties into administration. However, there was actually something positive to come out of PwC's intervention with The Australian reporting that the hearing has at least removed one key potential hurdle. The hurdle was the prospect of hybrid debt holders, who are owed about $1 billion, voting the restructure deal down unless that pot of $100 million was increased. However, the paper reports that a clarification from lawyers representing the senior lenders has highlighted that under the terms of an agreement struck in 2008, the senior lenders can essentially direct which way the hybrid holders should vote. So, it looks like the hybrids may not have that much of a hand and that's good news for Centro Properties' hedge fund debt holders.

Andrew Forrest, Fortescue Metals, ASIC

Fortescue Metals boss Andrew 'Twiggy' Forrest has bought himself more time in his long-running fight against the Australian Securities and Investments Commission and its allegations the mining magnate misled investors and breached his duty as a director. The corporate watchdog started chasing Forrest in 2006 and after failing to make headway initially, the regulator finally tasted victory in February with an appeal to the full bench of the Federal Court. Well, Twiggy has now had his own victory, with the High Court granting leave to him and his company to appeal the Federal Court ruling. So, the six-year stoush between Forrest and ASIC will now run into another round and as far as Fortescue shareholders are concerned, it's business as usual. Forrest's statements were made while Fortescue was still a small operation run from his lounge room – it's a very different reality today and the issue now basically boils down to ASIC fighting to ensure that principles of sound disclosure don't fall by the wayside, while Forrest is keen to avoid a blot on his reputation, which will be important even after he chooses to let Fortescue go its own way. Indeed, with Fortescue a far different beast now, the miner's shareholders probably have their eyes on far bigger issues. Meanwhile, there is talk that Xstrata is gearing up for a major acquisition in the local mining space. According to The Australian Financial Review, the list of possible targets ranges from Wesfarmers' Curragh operations, thermal coal producer New Hope, Nathan Tinkler's Aston Resources and Bandanna Energy.

Wal King, Leighton Holdings

Leighton Holdings' annual report has revealed one of the biggest 'golden handshakes' in Australian corporate history, with former head honcho at the local construction giant, Wal King, taking home a severance package of $15 million and potentially in line to double that payout to $31 million in the next three years. King relinquished his throne at Leighton in January and after 43 years at the company, he was paid $12.6 million and a salary of $2.45 million for the seven months to the end of January. That's $15 million so far for the years of service and as its turns out, there is more dough on the way, with Leighton set to pay King $4.9 million over three years in return for agreeing to a restraint period, as well as $6 million in consultancy fees to be paid over the same period. That takes the total to $25 million, which could jump to $31 million if King gets the transition bonus of $5 million for satisfactory transition to a new CEO and leadership team. That bonus has so far not been awarded by Leighton. It's a lot of money and unsurprisingly has raised eyebrows in some quarters, with The Sydney Morning Herald reporting that some investors and corporate governance experts are concerned by the severance package given the troublesome year Leighton has endured. So, there might be a few more curveballs headed in Leighton's direction with regards to justifying the payment.

James Murdoch, ACSI, News Corporation

We had a look at the chorus of derision aimed at James Murdoch overseas in yesterday's column and it looks like the media scion and News Corporation's credibility is now facing heat back in Australia as well, with the Australian Council of Superannuation Investors urging its members to vote against the re-election of six News Corp directors, including James Murdoch and his brother Lachlan, at the upcoming meeting. The ACSI, which represents super funds that manage $250 billion in assets, said that the call had been prompted by the media behemoth's inadequate efforts to address corporate governance standards in the wake of the UK phone hacking scandal. Apart from James and Lachlan Murdoch, the ACSI is lobbying against the re-election of Andrew Knight, Natalie Bancroft, Arthur Siskind and David De Voe.

Macquarie Bank, Redcape Property Group

Macquarie Bank has been revealed as the last minute suitor for debt-laden pub landlord Redcape Property Fund, with the AFR reporting that the bank has submitted plans to recapitalise the company and refinance senior and subordinated debt to provide the company with the necessary funds to meet its current capital expenditure. Redcape won't be complaining about the entry of a heavy-hitter like Macquarie because the company is pretty much on the brink and has asked its major lenders to extend its debt repayment deadline.

Wrapping up

In other debt related issues, things are getting serious over at Reliance Rail with the AFR reporting that the venture's directors have threatened to put the company, 49 per cent owned by Downer EDI, into administration unless they get some sort of guarantee of assistance from the New South Wales government with regard to refinancing Reliance's $2.4 billion debt load. With the directors set to sign off on Reliance's accounts today, the real question is just how much any party, whether it is Downer, the NSW government or debt insurers, are willing to assist. Downer is probably not keen to tip more money in while the NSW government would probably lend a hand but with strong conditions attached. Meanwhile, Deutsche Bank and Hong Kong-based broker and distressed debt buyer SC Lowy have both reportedly picked up chunks of Nine Entertainment's $2.6 billion of senior debt put to the market by lender United Overseas Bank. In appointments news, Chi-X has appointed former Credit Suisse Australia boss David Trude as an independent director as the stock market operator gets ready to start its operation on October 31. In other news, IT services company CSG is examining a $340 million takeover offer lobbed by an unnamed bidder. The target is being advised by Macquarie Capital and DLA Piper Australia. Integrated energy company ERM Power has acquired a 6 per cent interest in gas company Metgasco. Finally, Waste Management and Industrial Services Provider Tox Free Solutions has entered into an agreement to acquire Pilbara Waste Pty Ltd based in Port Hedland for $4.54 million, with the acquisition expected to be completed by the end of October.