(Bloomberg) -- CPI Property Group SA’s bonds tumbled after the Eastern European landlord became the latest target of short seller Muddy Waters.

Carson Block’s Muddy Waters said it was shorting CPI’s credit, claiming the firm is overstating the value of its assets and its cash accounts could be misstated. CPI has around €7.8 billion ($8.5 billion) of loans and bonds outstanding, according to data compiled by Bloomberg. 

The company’s €525 million hybrid note fell almost 10 cents on the euro Tuesday to 22 cents, the lowest since it was issued in 2020. Most of its other bonds hit all-time lows. Muddy Waters has not disclosed which securities it’s using for its short position.

“Muddy Waters purports to conduct research but thrives off shorts and explosive headlines,” CPI Property Group Chief Executive Officer David Greenbaum said. “Does the market really trust their analysis?”

CPI plans to publish a detailed response once it has had time to investigate the detailed and historic allegations and will hold a call for bondholders once done, according to a separate statement. It will actively seek ways to support bondholders through buybacks and is considering legal action against Muddy Waters, it added. 

CPIPG understands that a second report by Muddy Waters will be released soon, and we anticipate more unpleasant and untrue statements will be made.

CPIPG is almost entirely family-owned, and our primary shareholder has contributed significant amounts of capital to the group over a long period of time. Our group was built on the back of strong banking relationships and a track record of meeting our obligations, even in times of uncertainty. 

— CPI statement

Owned by Czech billionaire Radovan Vitek, CPI Property Group has been selling assets to reduce the debt it piled on after an acquisition spree — a goal it’s been pursuing with greater urgency as higher interest rates dent valuations. The short report comes a day after the company elevated its chief financial officer to the role of chief executive in a show of making deleveraging a priority.

Vitek remains the company’s majority shareholder, with a stake of more than 86%, according to data compiled by Bloomberg. Funds managed by Apollo Global Management Inc. hold more than 5%, a stake that was acquired for €300 million in November 2021.

The company’s properties were valued at €20.3 billion as of June 30, down from €20.9 billion at the end of last year. Meanwhile, it’s been working to reduce its debt pile following the acquisitions of Austrian landlords Immofinanz and S Immo in 2022. 

Read More: CPI Property Group Names Greenbaum CEO, Sells Croatia Hotels

CPI Property Group borrowed €2.7 billion to fund those deals, of which about €1.7 billion has been repaid through disposals, new financing and cash, the firm said in an August earnings statement. 

Short sellers borrow securities, sell them, buy them back at a lower price and profit from the difference — unless the stock or bond price rises. Then they could lose money instead. The practice is legal in most major stock markets.

Muddy Waters, Viceroy Research and Hindenburg Research are among some of the world’s most-feared short sellers known for their calls that roiled companies ranging from NMC Health Plc to India’s Adani Group. Some of Europe’s landlords such as Vivion Investments Sarl, Germany’s Adler Group and Sweden’s Samhallsbyggnadsbolaget i Norden AB have been their targets.

Among the allegations made by Muddy Waters are claims that Vitek benefited from undisclosed related-party transactions including two land portfolios that the company sold and bought back at a higher price over the course of three years. 

The repurchase of the land by CPI, at a price more than €30 million above the sale price, was disclosed as a so-called common control transaction when the company bought back the undeveloped plots around Prague in 2017.

It also alleges that one CPI acquisition was carried out in part to finance and replace Vitek’s super yacht and that the company overpaid Vitek’s son for shares in an Austrian landlord it was acquiring. 

Vitek started his first venture importing blankets from Germany soon after the collapse of communism in 1989. Similar to several other Czech billionaires, he started building his fortune in the voucher-for-share privatization program during the early years of the country’s transition to market economy.

Vitek, who is protective of his private life and rarely speaks to media, set up a fund in 1991 to take part in the sale of state assets, renaming it CPI in 1998 when it began focusing solely on real estate.

Block, 46, built his reputation as a short seller with bets against companies including Sino-Forest Corp, which he accused of exaggerating its assets. The Chinese company filed for bankruptcy protection 10 months after his report was published. He’s also made several bets against European real estate companies, shorting both Corestate Capital Holding SA and the bonds of Vivion Investments. 

But the firm has also courted controversy and was subjected to a probe in Germany, which centered on the disclosure of a short position in Stroer SE & Co. The investigation has since been dropped by the public prosecutor’s office. 

--With assistance from Hannah Benjamin-Cook and Peter Laca.

(Updates with additional information about probe in final paragraph.)

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