This article is from the Australian Property Journal archive
CENTRO Retail Australia has entered into a trading halt yesterday pending an announcement on a $200 million settlement with disgruntled investors.
CRF and its old shell Centro Properties Group have been locked in a legal battle in Melbourne’s Federal Court against an investors’ class action led by lawyers Maurice Blackburn since March this year.
The case was meant to run until June this year with more than 50 lawyers packed on the benches and over a dozen spilled into the public gallery in the court room. CRF has been placed in a trading halt until Thursday.
The $200 million settlement will set a new record in Australia’s corporate history eclipsing the benchmark set by Aristocrat in 2008 with its $144 million and Multiplex’s own debt debacle case which saw the company pay investors $110 million.
CRF had tried unsuccessfully to distance itself from the class action, arguing that it was not responsible for the debt debacle. However the Federal Court disagreed and joined the new trust to the litigation.
The revelations of Centro’s debt debacle on 18 December 2007 saw Centro’s share prices plunge, falling 76.1% or $4.34 to close at a basement price of $1.36. The freefall wiped billions of Centro’s market capitalisation, which sank from $4.82 billion to $1.15 billion in just one day.
And the newly minted Centro Retail Trust, which is now trading as Centro Retail Australia, also nosedived, falling 40.4% to 57.5 cents — wiping the market cap from $3.36 billion to $1.94 billion.
Maurice Blackburn’s principal Martin Hyde said the case was originally against Centro Properties Group and Centro Retail Trust, which merged to become CRF.
“Centro Properties is now effectively defunct. So it is hard to get money out of a company that is no longer really there, however Centro Retail Australia is very solvent,” he added.
Hyde said the 5,000 investors include mums and dads investors who lost their life savings to large financial institutions who are claiming tens of millions of dollars.
The class action’s Senior Counsel Noel Hutley said the new Centro cannot claim it is not liable for the actions of the old Centro.
He pointed out prior to the merger, the entities shared a similar board, executives and management.
“There is a degree of unreality to sever knowledge about what’s happening. One group would have known what the other investment group was considering,” he said.
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