Brixmor's top executives exit after accounting review, shares plunge

February 08, 2016 at 10:52 am EST

(Reuters) - Shopping center owner and operator Brixmor Property Group Inc said its CEO and two other top officers resigned after an internal review found that its financial statements were tampered with, sending its shares down as much as 25 percent.

The company said on Monday its quarterly statements had been tampered with to show consistent growth in same-property net operating income.

"The board is disappointed to have learned of the conduct and lack of appropriate management supervision uncovered as a result of the audit committee review," Chairman John Schreiber said in a statement.

Brixmor was taken public in 2013 by Blackstone Group LP. As the company's largest shareholder, the private equity firm holds a 36.24 percent stake, according to Reuters data.

Brixmor, which swung to a profit after its IPO, said it would not have to restate its financial statements as the impact of the discrepancies was not material to the results. The matter will not hurt the company's compliance with debt covenants, Brixmor added.

"We have zero tolerance for unethical behavior at the companies we invest in. While the dollar amounts involved were small, the principle is not. Fortunately, the business remains solid," a Blackstone spokesperson said in an email to Reuters.

Brixmor said it had reported the matter to the U.S. Securities and Exchange Commission.

Brixmor Chief Executive Michael Carroll, Chief Financial Officer Michael Pappagallo and Chief Accounting Officer Steven Splain, along with an accounting employee, resigned, effective immediately.

The New York-based company named Raider Hill Advisors LLC founder Daniel Hurwitz interim chief executive.

The company also rescheduled the release of its fourth-quarter results from Monday to Feb. 29.

"We are concerned that the company will need time to heal and to convince investors that no more irregularities exist," RBC Capital Markets analyst Rich Moore wrote in a note, downgrading the stock to "underperform" from "outperform" and cutting the price target to $25 from $30.

Brixmor operates a wholly owned portfolio of grocery-anchored community and neighborhood shopping centers, with 518 properties from California to Maine, including retailers TJX Cos Inc and The Kroger Co.

Brixmor's shares were down 20.2 percent at $21.09 after plunging to $19.91, their lowest since December 2013.

(Reporting by Arunima Banerjee in Bengaluru; Editing by Savio D'Souza, Kirti Pandey and Don Sebastian)