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centro could face 150m in legal bills...

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    Centro 'could face $150m' in legal bills
    Anthony Klan | February 20, 2008

    THE beleaguered Centro Properties Group could be slugged with $150 million in lawsuits and legal bills for its failure to properly disclose $2.6 billion of short-term debt, according to analyst JP Morgan.

    The estimation comes as Centro auditor Pricewaterhouse-Coopers apparently moved to distance itself from Centro's failure to account for that debt by saying it would examine Centro's accounting practices.

    "It appears the finger-pointing is continuing on the classification of debt," Rob Stanton said in a JP Morgan analyst's report.

    "Given this 'debate' has the potential to give rise to legal action, we have allowed for $150 million of legal costs/lawsuits in our net asset value assessment."

    Shares in the highly volatile Centro Properties Group tumbled another 17 per cent yesterday to close at 52c as uncertainty about Centro's ability to source a cash injection continued to plague the group.

    PwC said on Monday that it would investigate why Centro had "changed the classification of current and non-current debt".

    "PwC will consider in its current review of Centro's half-yearly accounts the basis on which Centro Properties Group and Centro Retail Trust have changed the classification of current and non-current debt," the auditor said.

    The PwC partner who signed off on Centro's accounts, 44-year-old Stephen Cougle of Armadale in inner Melbourne, has refused to talk to The Australian despite repeated requests.

    Centro on Friday increased by $1.5 billion to $2.61 billion the reported value of short-term debt it held at June 30. In August, Centro said it had no short-term debt (debt due to expire within 12 months) and in September it told the market it held $1.096 billion of short-term debt. Law firms Slater & Gordon and Maurice Blackburn are preparing class action lawsuits against Centro based on that non-disclosure of debt.

    JP Morgan said while Centro's Friday announcement that it had been able to extend some of its short-term debt facilities by several months was "certainly a step forward", the group's lenders "still have Centro on a very short leash", which meant Centro would see a "material increase" in its cost of debt which would rise to the "low double-digits".

    "Even if Centro Properties Group and Centro Retail Trust deal with the $4.9 billion now expiring at the end of April, there is a further $2.5 billion expiring before the end of the year, taking 2008 debt facility expiries to $7.4billion," JP Morgan said.


    Cheers, Pie :-)
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