Centro's near-death experience

CENTRO Properties will now move to its next phase of being a debt-free, simply structured retail landlord, after its court battle with PricewaterhouseCoopers was withdrawn.

By InvestSMART · 3 Dec 2011

By InvestSMART ·
3 Dec 2011

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CENTRO Properties will now move to its next phase of being a debt-free, simply structured retail landlord, after its court battle with PricewaterhouseCoopers was withdrawn.

After close to four years of battling to stay alive, Centro was given the green light to move ahead after PwC backed down from appealing against the NSW Supreme Court's decision on the merger.

Yesterday, the former embattled Centro Properties was suspended from trade.

On Monday, it will list on the ASX on a deferred delivery basis, and from December 15 it will be reborn as the new $3.4 billion Centro Retail Australia.

After gaining the court's approval on Thursday, PwC called for a stay of execution to read the judgment and decide whether to appeal. That was granted by Justice Ian Barrett.

But at the 11th hour, PwC pulled out of the action, which Centro's chief executive, Robert Tsenin, said could have caused some reputation damage.

PwC forced the court action after it objected to the Centro scheme, which included a payment of $49.8 million to Centro equity holders, but left only $10 million for very significant contingent liabilities arising from the class action.

"Since August PwC had been requesting information to address its concerns, but this had not been forthcoming," the firm said in a statement. "As a result, PwC felt obliged to contest the scheme and seek the court's adjudication upon it. The issues raised by PwC were significant and complex and this was recognised by the court.

"Now having received that adjudication and considered his honour's reasons, PwC has chosen not to appeal." Mr Tsenin told reporters he was delighted with the outcome and it was now time to put the past behind the group and look to a positive future for the new-look Centro.

"We can now focus on implementing the aggregation scheme to make the group debt-free and add value for investors," he said. "As for the court action, I think PwC will have to live with the consequences of their decisions.

"They failed, and it's up to the market as to how it reacts."

When asked if he felt PwC had damaged its reputation, Mr Tsenin said: "They must have."

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Frequently Asked Questions about this Article…

What happened in Centro Properties' court battle with PwC and how did it end?

Centro Properties faced a long court battle with PricewaterhouseCoopers (PwC) over its proposed merger scheme. PwC objected to the scheme and started court proceedings, secured a stay of execution so it could read the judgment, but ultimately withdrew and chose not to appeal. With PwC backing down, Centro was cleared to move forward with its restructuring plans.

What does the restructuring mean — is Centro becoming debt-free?

Yes. The plan is for Centro to implement an aggregation scheme to become a debt-free, simply structured retail landlord. Management says the restructuring will allow the new-look group to focus on adding value for investors as a debt-free Centro Retail Australia.

When will Centro relist on the ASX and what is 'deferred delivery' listing?

The article says Centro was suspended from trade and will list on the ASX on a deferred delivery basis on the coming Monday, with the entity to be reborn from December 15 as the new $3.4 billion Centro Retail Australia. A deferred delivery listing means the securities are listed but formal transfer or settlement is delayed until a specified date.

How did PwC justify challenging the Centro scheme?

PwC said it had been requesting information since August to address concerns about the scheme and, because that information had not been forthcoming, felt obliged to contest the scheme and ask the court to adjudicate. PwC described the issues as 'significant and complex.'

What were the contentious financial provisions in Centro's scheme that PwC highlighted?

PwC objected to a distribution under the scheme that included a $49.8 million payment to Centro equity holders while leaving only $10 million available for significant contingent liabilities arising from a class action. That imbalance was a central point of PwC's challenge.

What might the outcome mean for everyday investors in Centro Retail Australia?

For everyday investors, the immediate implication is that the group can proceed with its debt-reduction plan and list as a simplified retail landlord, which management says should add value. However, investors should still be mindful of lingering contingent liabilities from the class action and how the market reacts to the relisting.

Did Centro's management comment on any reputational impact from the dispute with PwC?

Yes. CEO Robert Tsenin expressed relief at the outcome and said it was time to put the past behind the group and focus on a positive future. He also suggested PwC may have suffered reputation damage as a result of forcing the court action and then not appealing.

What should investors watch next after the court decision and relisting plans?

Investors should monitor the implementation of the aggregation scheme that aims to make the group debt-free, the official ASX deferred-delivery listing process, any updates on the class action contingent liabilities, and market reaction to the reborn $3.4 billion Centro Retail Australia.