City Pacific (CIY) shares were placed in a trading halt amid mounting fears the Brisbane property group, along with its largest mortgage fund, is on the verge of collapse.
The timing of the trading halt request followed a plunge in the stock price this morning that wiped out half of its value amid reports that its First Mortgage Fund might struggle to repay a $240 million debt within three months.
The company said it requested the halt to respond to a price query received from the ASX.
“We expect our response to the price query received from the ASX will be the event that will end the trading halt,” the announcement said.
Shares in the company fell $1.11 or 58% to a low of 81c this morning. They last traded at 97.5 cents before the trading halt. This fall comes after yesterday’s 22% slump in City Pacific’s share price.
The company has continued to leave its investors in the dark after it released on Friday evening a second set of financial half-year results that showed discrepancies with its original set of accounts.
The new accounts showed City Pacific’s current liabilities – which do not include the mortgage fund’s debts – rose from $126.5 million in the original accounts to $156 million.
The $240 million debt has to be reduced to $150 million within four weeks. In all, the company and its trusts owe at least $350 million to the Commonwealth Bank.
The company is seeking an "institutional" investor – with speculation that it may be a rival property company – to pump funds into the trust and repay the debt.
In December City Pacific deconsolidated the fund from its accounts, meaning it no longer has any financial exposure to the fund. Only the fund’s unit-holders, mainly retirees, will be exposed.
The Australian Shareholders Association has raised concerns on the changes to City Pacific’s accounts.
"This sort of thing is starting to sap confidence from the market,” the association’s spokesman, Stephen Matthews, said, referring to the similar changes in Allco Finance and Centro’s accounts.
"I’m very concerned and my members are very concerned about the inability of these people to get their balance sheets right,” he said.
City Pacific’s chief executive, Phil Sullivan, who has a 19 per cent stake in the company, has strenuously rejected rumours his company was on the verge of collapse.
And he has argued there is nothing untoward in City Pacific postponing its settlement of the purchase of a property on the Gold Coast for a development last month.
He said the company had also settled a winding-up order from the Victorian Government on its $650 million marina development.
