Allco Principals Investments Raises White Flag Of Surrender
The Age
Friday March 7, 2008
THE personal wealth of Allco founder David Coe and his senior executive team was reduced to a shadow of its former glory yesterday when their major investment vehicle said it would appoint an administrator.
Allco Principals Investments raised the white flag after its major asset, 52 million shares in the listed Allco Finance Group, was wiped out when banks called in huge margin loans. National Australia Bank and Bank of Scotland moved to exercise their rights to the margin loans and take possession of the Allco shares. Among the shares were more than 29 million pledged by Allco executives in January in a vain attempt to stop the margin call being exercised. At last year's peak, the value of the shares would have been $700 million. The plunging share price reduced that to $33 million yesterday. The sharp fall in value means the executives and their vehicle will be left with nothing because the shares will be used to pay down margin loans totalling $150 million over the shares. The move leaves the banks carrying losses of more than $100 million. National Australia Bank, which lent about $110 million, said it would make a provision for a loss and "pursue all avenues of recovery". Bank of Scotland, which lent about $40 million, has appointed a receiver to all the assets of Allco Principals, which means the vehicle will probably be liquidated.The banks' decision to exercise their rights followed a standstill arrangement made in January after another lender, broker Tricom Equities, sold 22 million shares under another margin loan. At the time Allco's share price was $3.62. But since last week's poor reception to Allco's plans to revive its business, its shares have plummeted, closing at 63? yesterday. As part of the standstill agreement, Allco executives tipped in another 29 million shares from their personal holdings, bringing the total of Allco shares at stake to 52.8 million. But the standstill agreement was never finalised. A NAB statement said there had been conflict with Allco Principals Investments about a commitment to put in further assets under the proposed standstill agreement, which indicates the executives had decided to cut their losses. "Allco Principals Investments has now advised that it will not provide the additional security or meet other requirements sought by NAB and consequently the standstill agreement cannot be resolved to NAB's satisfaction," NAB's statement said.The appointment of an administrator to Allco Principals Investments is separate to the travails of the listed company, Allco, which is continuing in an attempt to refinance $250 million in debts. But Allco will be among the creditors lining up to take assets out of Allco Principals after Allco lent Allco Principals $43.3 million in the December half. Allco HIT also lent $46 million to Allco Principals last year in one of many related party transactions.Allco is hoping the difficulties with Allco Principals will not derail its bank negotiations, although there are increasing signs that the flagged asset sales to keep Allco a going concern are more likely to be an orderly sell-off of most of the business.
© 2008 The Age
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