THE Victorian government’s partner in the $1 billion Melbourne Convention Centre is under pressure from spiralling debts and has been selling assets to raise cash.

Even with the state contributing $370 million to the centre’s development, its financial success is far from assured, sources familiar with the project say.

The latest financial accounts for the MCC’s owner, Plenary Conventions Pty Ltd, show a loss of $25 million for the year to last December, largely due to rising costs on financing its $530 million in debts. Liabilities have exceeded assets for the first time, by $4 million.

The MCC, with a 5000-seat auditorium, opened three years ago. The award-winning centre is one of the largest convention facilities in Australia and attracts tens of thousands of visitors to Victoria each year. It was spruiked as an asset to attract business to Melbourne.

Last night a Plenary spokesman said the centre was performing better than expected. “The accounting treatment [of Plenary] doesn’t bear any resemblance to the economic health of the project,” Kelvyn Lavelle said. “The equity returns … are tracking ahead of forecasts.”

The Plenary Group was the consortium leader for the project, providing equity and project management. Deutsche Bank is the financial underwriter, Austexx is the commercial development partner, and Multiplex Constructions is the builder.

Plenary is extremely highly geared, with negative shareholder funds and total assets of $537 million funded by $530 million of debt.

Most of the debt ($460 million) is owed to Deutsche Bank, which owns 18 per cent of Plenary Group which, in turn, owns 30.1 per cent of Plenary Conventions Pty Ltd.

The accounts appear to show that Plenary has sought to manage the project’s rising costs by selling assets. Company searches show that Plenary Conventions Holdings Pty Ltd (PCH, the 50.1 per cent owner of Plenary Conventions Pty Ltd) has sold 39.9 per cent of its shares to the Canadian fund manager Caisse de depot et placement du Quebec.

This means the convention centre is 30.1 per cent owned by Plenary Conventions, which maintains the management rights, and 20 per cent owned by Canada’s largest pension fund manager. The other 49.9 per cent is held by an institutional investor in New Zealand. Directors say they expect Plenary to continue to meet its obligations.

Meanwhile, the Tax Office has applied to wind up a related company, Plenary Conventions Tower Pty Ltd, a notice lodged on January 12 shows. The ATO’s claim is linked to an alleged tax debt of the convention centre’s hotel and retail business.

This follows the placement of two of Plenary Group’s 25 per cent-owned associated companies, South Wharf Retail Pty Ltd and South Wharf Tower Pty Ltd, into external administration in November.