Banks Give Allco A Break

Sydney Morning Herald

Wednesday July 2, 2008

Stuart Washington

ALLCO Finance Group shareholders are learning to live with banks on their backs.

An announcement of a fifth reprieve on its bank financing resulted in a momentary 15 per cent rally in the share price yesterday.

Not that 15 per cent in Allco shares means much any more. The stock initially rose 15 per cent - or 6c - to 46c, a far cry from its $13.23 peak of last year. The shares settled to close at 41.5c, up 1.5c for the day.

Allco is no longer in the ASX 200 and now ranks 416th out of 495 companies in the ASX All Ordinaries index, based on its market capitalisation.

The company has been given a new deadline of July 31 to sort out its refinancing as the banks continue to call the shots inside Allco. The banking syndicate includes Commonwealth Bank, Westpac, and ABN Amro.

Allco has previously announced tough bank-imposed conditions on its operations including a target of reducing overall debts from a previous facility of about $1 billion to $400 million by September next year.

Security over all the group's assets has also been placed in the hands of the banks.

The bank scrutiny means the Allco chief executive, David Clarke, has delayed putting out a conclusive restructuring plan for the limping business as the banks continue to "roll" their review of the loans.

The alternatives are for the banks to agree on longer-term financing or to pull the plug on the business and force a fire sale.

The delay in finalising Allco's debt financing is in contrast to Babcock & Brown, which revealed on Monday it had secured approval from its banks to remove a market capitalisation trigger from its own loans.

It has reduced its senior debt to a current level of $831 million, through sales of $177 million in assets in businesses including aviation, rail and shipping.

Along the way Allco expects to post the biggest loss in Australian corporate history, having warned writedowns of goodwill and the values of its management rights may result in losses of more than $1.5 billion.

Banks were given power in the Allco situation because its share price plunge in January broke through a previously undisclosed market capitalisation trigger that allowed them to review a $250 million bridging loan and $900 million in senior debt.

© 2008 Sydney Morning Herald

Back to News Index | Back to Home