FOR sale: one discount shopping centre chain, slightly soiled. Price negotiable.
Managers of Austexx, which owns the DFO chain, are talking up the business after this week's brush with death.
Chief executive Geoff Porz and managing director Frank De Rango plan to recapitalise the business, but they face an uphill struggle to find the huge wad of cash needed to save the group.
Who would want to pour more millions into a business burdened with about $1 billion in debt and a Byzantine corporate structure that has already burnt one of Australia's highest-profile businessmen, Australian Competition and Consumer Commission chairman Graeme Samuel?
While banks have agreed to let Austexx finish its South Wharf project, so that it can be sold off, sources close to the group say that once that is done and other creditors are satisfied there may be little or nothing left for investors.
Austexx borrowed too much during the boom years, when debt was cheap and terms were easy.
But now, with retail in a post-stimulus slump and banks watching their balance sheets like hawks, the group is finding it far harder to roll over loans as they fall due.
While the group was valued at about $1.5 billion at its peak, values have since fallen and on some estimates its assets are now worth roughly the same amount as its debt.
In addition to borrowing too much, the group has a corporate governance problem.
Austexx founders David Wieland and David Goldberger control their stakes through a pair of trust companies, and individual shopping centres appear to have partnerships attached to them.
Adding to the complexity, Austexx is effectively two groups that share common directors, together with similar company names and shareholders.
It is this double structure, and the fact his interest is held in trust, that is at the root of Mr Samuel's dispute with the company.
As a result of the crisis Mr Samuel is believed to have all but written off his investment in Austexx, which was probably worth between $25 million and $30 million at its peak.
Mr Samuel's stake is difficult to value. He effectively owns a quarter of one part of the group, which in turn owns four shopping centres.
They are the DFOs in Homebush, Essendon and Brisbane and a complex next door to Melbourne's Southern Cross Station.
While the DFOs are believed to be performing well, an attempt to turn Spencer Street into a full-price centre has not been entirely successful.
The double company structure, along with a blind trust to hold his interest, was set up when Mr Samuel became ACCC chairman in 2003.
It was supposed to ring-fence his stake - already long-standing in 2003 - which was considered too difficult to sell because of the partnership nature of Austexx.
But the four centres Mr Samuel invested in have been loaded up with debt, which has been used to finance new developments in which he has no stake. To those in Mr Samuel's camp the loans are ''appalling''.
''It was absolutely outrageous,'' said one. ''It was not done in an appropriate manner.''
A $180 million line of credit, believed to be drawn down by between $50 million and $100 million, was taken out against the Spencer Street centre in September 2008.
Demonstrating how the two halves of the group have been intermingled, the loan is also backed by the troubled South Wharf development, part of the new group in which Mr Samuel has no shareholding.
Separately, South Wharf's $450 million bank loan, which provoked this week's crisis, is in turn secured against the four outlets in which Mr Samuel invested.
Company documents approving the South Wharf and Spencer Street loans are signed by Mr Porz, who until last month was a trustee of Mr Samuel's estate, which is held for the benefit of his children.
Mr Samuel appointed Mr Porz as one of his trustees because as CEO he knew the DFO business intimately, and because the pair had long been friends.
Not any more.
Mr Porz and trade unionist Bill Kelty resigned as trustees last month.
That left Mr Samuel's estate in the hands of trustee Andrew Kroger, who is believed to have been unaware of the loans.
Mr Kroger, and new trustee Guy Jalland, negotiated a deal late on Thursday night that ended the crisis.
Mr Porz declined to comment on the loans because the settlement with Mr Samuel's trustees is confidential.
Mr Kelty, who is believed to be close to Mr Wieland and Mr Goldberger, could not be reached.
For their part, Mr Wieland and Mr Goldberger have maintained radio silence. Their representative, high-profile lawyer Leon Zwier, says they are ''passive investors''.
With an estimated combined wealth of $650 million, they might need to become a little more active if Austexx is to be saved.
