Banks Give Allco Three Weeks' Grace

The Age

Saturday April 12, 2008

Danny John, Sydney

THE debt-laden Allco Finance Group has not yet been able to persuade its main lenders of the merits of key parts of its huge asset sale plan, with the banking syndicate asking for more time to give its approval.

Allco Finance, which is due to repay $250 million by May 2, is working to get its restructuring proposal accepted, following its bankers' decision to extend the process by three weeks.

It is the second time in less than a fortnight that the group's lenders have agreed to an extension, reflecting the complexity of the proposed deal and the need for all the banks to go along with the plan. Known as a "review event", the detailed scrutiny of AFG's financial position was triggered in early February when the group's sharemarket capitalisation fell below $2 billion after its share price dived in the general ASX rout that began a month before.

Corporate restructuring specialists Ferrier Hodgson were appointed to oversee Allco's management blueprint to refinance or repay $1.1 billion of loans by September. The first rescheduling date of March 31 was pushed back to yesterday and then was extended again in yesterday's agreement.

Sources said that the syndicate of at least 10 banks was yet to be satisfied by the list of planned and widespread disposals across the group or the timetable by which it would restructure its current loan commitments.

The proposal has been reviewed by Ferrier and has gone to the banks to be studied in detail. The banks are believed to be in no immediate rush to sign up to the revamp of Allco, which will reduce in size significantly as the pace of asset sales picks up.

The group said that the talks with its lenders were ongoing. "Allco advises that constructive discussions are continuing with the senior banks in relation to a restructure of the senior debt," it said in a statement to the ASX.

It also said that the discussions could go on past May 2 if the banks needed more time.

Key parts of Allco's offshoots such as its Rubicon real estate operations are already looking to sell at least $1.5 billion worth of property to reduce their respective debt mountains.

More directly owned assets such as its wind farm energy business are also for sale, which will probably result in $150 million going towards repaying Allco's short-term debt needs.

Allco's aim is to shed itself of all its financial-related businesses and focus back on its aviation, shipping and rail leasing operations on which it was formed nearly 30 years ago.

Allco's shares yesterday shed half a cent to 46?.

KEY POINTS

? Allco Finance received a debt extension for the second time in less than a fortnight.

? Its lenders agreed to extend the deadline to repay $250 million to May 2.

© 2008 The Age

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