Little Left For Allco Investors

Sydney Morning Herald

Friday November 7, 2008

Danny John

SHAREHOLDERS in the failed Allco Finance Group stand to recover little, if anything, of their investments in the company even after its remaining assets are sold to pay back its multitude of creditors.

With $1.02 billion owed to its lenders through secured debt ($666 million) and subordinated loan notes ($350 million), Allco's plunge into administration has crystallised the losses in value investors have experienced over the past 10 months.

The receiver Ferrier Hodgson said yesterday it was far too early to estimate what might be raised from any asset sales, including Allco's once-core aviation and shipping leasing operations.

But with the priority for cash driven by the need to return the $1 billion to lenders, joint receiver Steve Sherman gave an indication of the size of the challenge for Ferrier Hodgson if investors are to get anything.

"It would have to be a lot of money coming into the group before that was to happen," Mr Sherman told the Herald.

The plight of Allco shareholders, whose stock will remain suspended indefinitely at 14 cents, was underlined by a flurry of statements from banks about what they were owed.

A proportion of loans has been written down in value by the banks but they will still be looking to the receiver to recover as much as possible of the amount owing as Allco is dismembered.

Commonwealth Bank, the biggest Allco lender within the syndicate of Australian banks, confirmed yesterday that it was owed $170 million.

And while National Australia Bank said it was not directly exposed to the parent company, it had lent an undisclosed sum to some Allco entities, thought to be the Rubicon real estate offshoots.

NAB said it was considering the implications of the appointment of McGrathNicol as administrator but was not in a position to say how much it was owed. The investment bank UBS has estimated that NAB could have an exposure of $95 million.

With Westpac having disclosed a $200 million loan on Wednesday, the major Australian lenders have $465 million at risk from the firm's collapse. The remaining $600 million is owed to overseas lenders.

Ferrier Hodgson yesterday spent another day assessing the prospects for the group and is pushing ahead with the planned sales of Allco's rail and financial investment assets, for which offers to continue to come in.

Mr Sherman said there was no pressure from the group's banking syndicate for any quick disposals, especially as Allco was now not bound by the debt repayment schedule that required it to return $147 million to its lenders before Christmas.

Various market-listed Allco offshoots are expected to update the market today about the effect of the collapse on their businesses.

© 2008 Sydney Morning Herald

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