asic summons centro for talks

THE corporate regulator was locked in discussions yesterday with Centro Properties Group over its $5 billion credit-crunch meltdown.

A Centro executive from Melbourne, flanked by two lawyers from Clayton Utz, met four Australian Securities and Investments Commission staff at the regulator's Sydney offices yesterday morning.

Although neither party would discuss the meeting, ASIC is likely to be interested in Centro's failure to properly account for more than $1 billion of debt in its June 30 accounts.

In those accounts, Centro incorrectly classified $1.097 billion of current debts as "non-current" in a move that masked a $450 million funding blackhole that would have showed that Centro was unable to pay its short-term debts.

The Australian, present in ASIC's foyer yesterday on unrelated business, overheard the Clayton Utz lawyers advising the Centro representative before the ASIC meeting. During that discussion, the Centro representative made light-hearted comments to the lawyers about how he believed in taking an optimistic view of unfavourable circumstances.

Separately, the Commonwealth Bank of Australia is now understood to be the first Centro lender to have pulled long-term debt funding from the group last month, triggering Centro's debt crisis three weeks ago. The CBA held $600 million first-ranking secured debt and $600 million of unsecured debt with Centro, a banking analyst said.

He said NAB, the Bank of America, ANZ and St George were among the other financiers with outstanding loans to Centro.

The banks are engaged in a vigorous debate over the security of their Centro loans, an issue clouded by the complexity of the shopping centre giant's structure.

The analyst said the debate could limit Centro's ability to stay afloat, with the major lenders able to call the receivers in. In relation to Centro's meeting with ASIC yesterday, analysts said the commission would probably be interested in a range of issues surrounding Centro's market disclosure, both before and after its share price crash last month.

"There has been been speculation over the past three years over about five issues that Centro could have potentially had to deal with ASIC on," an analyst said.

One was Centro Property Group's controversial move early last year to transfer a stake it held in satellite Centro Retail Trust to the group's unlisted Centro Direct Property Fund and Centro Direct Property Fund International.

That move was criticised by some analysts, who claimed it could disadvantage investors in those two unlisted funds, as they would have to pay more for stock in Centro Retail Trust than parent Centro would pay.

"In the latest set of announcements it looks as though Centro now owns that stake again, but there has been no commentary in Centro's accounts associated with it," the analyst said.

The timing of Centro's Friday announcement - that some of its lenders had slashed the amount they were willing to lend to Centro on fixed terms - was also something that may have attracted ASIC's attention.

"Realistically, under continuous disclosure, it strikes me as very interesting that those two announcements would come out at 4.07pm when the market closes at 4pm," the analyst said.

"While it may not be something that in itself would get you a call up into the ASIC office, it's the kind of activity that would lead people to believe ASIC would be investigating them."

Centro shares fell 5c at $1.11, in line with the market