ASIC aims to wind up Westpoint parent

Australia's corporate watchdog has sought to wind up Westpoint Group parent company Westpoint Corporation Pty Ltd after its auditors revealed an alleged $69 million deficiency in assets.

The move comes on the same day as the Australian Securities and Investments Commission had been successful in its legal action to appoint liquidators to two Westpoint mezzanine finance companies yesterday.

ASIC is seeking the winding up of Westpoint Corporation on grounds of insolvency, saying they believe it is responsible for arranging, managing and co-ordinating Westpoint's property projects as well as acting as the group's treasury.

In a statement issued this afternoon, ASIC said they were "concerned that, as a result of its current financial position, Westpoint Corporation would be unable to meet its obligations under the guarantees given to the mezzanine companies to make good expected shortfalls in the repayment of amounts owed to investors."

"ASIC is of the view that a liquidator can properly investigate the activities of Westpoint Corporation and take the necessary action to recover monies for the benefit of investors and creditors."

York Street Mezzanine and Ann Street Mezzanine were put into voluntary administration two weeks ago along with four other mezzanine companies, but ASIC was not satisfied and successfully pushed for liquidation, saying $147 million of investors money was at risk of not being repaid.

Geoffrey Totterdell and David McEvoy of PricewaterhouseCoopers were appointed as liquidators of York Street Mezzanine, while Mr Totterdell together with Ian Hall have been appointed liquidators of Ann Street Mezzanine, following on from their appointments as voluntary administrator to York Street Mezzanine.

Last week the administrators report by Pricewaterhousecoopers rejected a proposed deed of company arrangement for the two mezzanine companies because of uncertainty, but Westpoint maintains it is business as usual at one of the country's biggest private developers.

The outcome of ASIC's move to wind up Westpoint Corporation won't be known until January, but sources say the auditor KPMG's estimated $69 deficiency could be based on a favourable estimate of assets, and that the actual deficiency could be much greater.

Westpoint executive general manager David Jones said the company was disappointed that Ann Street and York Street were put into liquidation, and that he believed the best outcome for investors would be a deed of company arrangement.

"We are concerned that by liquidating the companies, assets will be treated in a firesale way which won't deliver the best outcome for investors so we will still be pushing hard for a deed of company arrangement," Mr Jones said.

ASIC opposed a deed of company arrangement proposed by the Westpoint Group for York Street because there were serious doubts about whether promised funds would become available and, and said that it did not offer anything more than what the creditors are already entitled to.

In relation to ASIC seeking the winding up of Westpoint Corporation, Mr Jones said the company would strongly and stridently defend the move, and that business was still strong, with over $1 billion of projects underway around the country comprising of more than 3000 units.

As well as appointing liquidators to Westpoint companies, ASIC is also alleging misleading and deceptive conduct by Westpoint Management Ltd, including Westpoint founder Norm Carey who set the company up in 1985.

Westpoint's website says the company has current and completed development projects valued at more than $1.7 billion, and has net assets of about $75 million.

Westpoint has been the subject of ASIC's attention for a number of years due to their use of unsecured promissory notes in attracting retail investors.

Last year ASIC halted plans to raise debt to fund the Emu Brewery Project, requesting that the Supreme Court rule on whether Emu Brewery Mezzanine Ltd should have offered promissory notes as debentures or financial products under the Corporations Act.

The Court ruled that promissory notes issued constituted a managed investment scheme and that a prospectus should have been lodged.

ASIC's examination of Westpoint comes as ASIC chairman Jeffrey Lucy today said high-yield financial products that promised high returns but were linked to inherently risky property developments would be targeted in 2006.

Earlier this month, ASIC laid criminal charges against notorious property spruiker Henry Kaye for criminal fraud.