Prime creditors to vote on liquidation

Creditors are being asked to vote next week on whether to liquidate the collapsed Prime Retirement & Aged Care Trust’s responsible entity, Australian Property Custodian Holdings. The vote follows the company going into administration after a bank creditor appointed receivers, and it puts claims of more than $650 million into play.

The administrator’s report shows secured bank creditors are owed about $310 million. Specific banks named include National Australia Bank and CFAL (a combined $195 million), Suncorp ($72.8 million) and Members Equity Bank ($41.7 million). The administrator also recommended admitting unitholders as unsecured creditors for about $330 million, and noted a further $29 million mostly related to party creditors.

Mr Horne recommended winding up the trust’s responsible entity and admitting unitholders to vote as unsecured creditors for about $330 million because of alleged wrongful acts and defective disclosure. He also recommended unitholders be allowed to vote on key items including the management fee sale (which with interest rose from $60 million to $88 million), $33 million paid to founder Bill Lewski when the trust listed (with interest estimated at $48 million), and a further $195 million set aside as a contingency for alleged misleading or deceptive conduct.

Management rights are the contractual rights to operate the retirement villages. The report says creditors’ best option for a meaningful return is to secure those management rights away from the current operator, Lend Lease Primelife. Valuations estimate the villages would be worth about $100 million more if the management rights were attached to the properties, improving recoveries for creditors.

Founder Bill Lewski sold the management rights to Babcock & Brown Communities (now owned by Lend Lease Primelife) for $60 million. The propriety of that sale is being pursued by the bank receivers through public examinations and by the Prime Trust Action Group, which represents the interests of about 9,000 unitholders.

Yes. Mr Lewski has initiated legal action against Lend Lease Primelife alleging improper management of the villages. The administrator expects litigation funding agreements to be in place before the creditors’ meeting so he can consider action against Lend Lease Primelife. Separately, senior executives at Lend Lease Primelife have gone to the Federal Court to oppose a summons to be examined by one of the receivers.

Valuations prepared in June of the previous year indicated the banks would recover all their funds, but the administrator noted those valuations were based on expected 2012 income from unit sales that proved to be considerably higher than actual outcomes. That means recovery isn't guaranteed and depends on outcomes like the sale of properties and any transfer of management rights.

In his report Mr Horne said there had been no findings of unfair preferences, uncommercial transactions, unfair loans or insolvent trading. However, he still recommended admitting unitholders as unsecured creditors and pursuing certain claims because of alleged wrongful acts and defective disclosure related to specific payments and the management rights sale.