THE Victorian government’s partner in the $1 billion Melbourne Convention Centre is under pressure from soaring debts and has been selling assets to raise cash.
Even with Victoria contributing $370 million to the development of the new MCC, its financial success is far from assured, according to sources familiar with the project.
The latest financial accounts for MCC owner, Plenary Conventions Pty Ltd, show a loss of $25 million for the year to December 2011 thanks largely to rising finance costs on the company’s $530 million in debts. Liabilities exceeded assets for the first time, by $4 million.
The MCC, spruiked as a key asset to attract business to Melbourne, began operating three years ago. Plenary Group was the consortium lead on the MCC project, providing equity and project management. Deutsche is the financial underwriter, Austexx the commercial development partner and Multiplex Constructions the builder.
The company is 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 from Deutsche Bank. Deutsche itself owns 18 per cent of Plenary Group, which owns 30.1 per cent of Plenary Conventions Pty Ltd.
It appears from the accounts that Plenary has sought to manage the rising costs of the project by selling assets. Company searches show Plenary Conventions Holdings Pty Ltd (PCH, the 50.1 per cent owner of Plenary Conventions Pty Ltd) has sold down 39.9 per cent of its shares to a Canadian fund manager, Caisse de Depot et Placement du Quebec (CDPQ). This means that the MCC is now 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 a New Zealand-based institutional investor.
A statement from directors in the accounts said they expected Plenary to continue to meet its obligations.
Despite the negative shareholders funds, a spokesman for Plenary said last night that the PPP was in fine shape and performing ahead of expectations.
“The accounting treatment (of Plenary) doesn’t bear any resemblance to the economic health of the project,” said Kelvyn Lavelle. “The equity returns from the project are tracking ahead of forecasts.”
The Tax Office has also applied to wind up a related company, Plenary Conventions Tower Pty Ltd (PCT), according to a notice lodged on January 12, 2012. The ATO claim is linked to an alleged tax debt of the MCC hotel and retail business of Plenary Group and the financially troubled Austexx DFO Group.