Nab Thwarted On Allco Move

The Age

Monday September 15, 2008

Eric Johnston, Financial Services Editor

NATIONAL Australia Bank has been thwarted in its bid to place more than a dozen private companies associated with Allco Finance Group into liquidation, after creditors opted to pursue a workout plan.

This means the 14 companies that were often co-investors alongside Allco Finance Group in its unlisted funds will try to trade their way out of their problems, including an orderly sell-down of assets.

Allco Principals Investments directors appointed a voluntary administrator to the private vehicles in March after Allco Principals was hit with a margin call on a loan it held over Allco Finance Group shares. This cascaded down to several smaller shelf companies that had financing agreements with Allco Principals Investments.

Minutes of the creditors meeting show $854 million has been claimed against Allco Principals Investments and 13other companies, including Allco HIT Holdings, Allco Principals Property and Allco Principals Rail, which were placed under administration.

As well as using these companies to house their direct holdings, the four executives - David Coe, Nick Bain, David Veal and Chris West - had collectively tipped shares into Allco Principal Investments, which was often used as collateral to raise additional funding to co-invest in Allco's unlisted funds.

NAB was the only creditor to vote against placing the privately held companies controlled by Allco Finance Group into a deed of company arrangement, according to the minutes of the meeting. But the banking giant was overruled when 26 creditors opted to push ahead with a workout plan.

A deed of company arrangement covering the 14 companies is expected to be finalised this week.

Allco Finance Group could be required to inject funds into a private vehicle to assist with the workout. However, this is likely to maximise the $60 million-plus it claims it is owed from the collapsed companies. Allco Finance Group recently warned it remained in a fragile position after delivering a $1.74 billion net loss for 2008, mostly as a result of write-downs on assets acquired over the past few years.

Allco is trying to stabilise its finances by pushing ahead with a program of asset sales to reduce debt.

Collectively the 14 Allco companies owe creditors $854 million, most of which is claimed against Allco Principal Investments. NAB has one of the largest claims, totalling $89.5million against Allco Principal Investments. Bank of Scotland International has claimed nearly $50 million.

Private vehicles owned by current and former Allco executives are also claiming funds from Allco Principals Investments.

One company, Raejoe - owned by Allco's previous executive chairman, David Coe - is claiming $2.12 million. Private companies owned by Allco deal makers David Veal and Chris West are claiming a combined $2.57 million.

Administrator Stephen Parbery, of specialist PBB, has noted that the 14 companies had a "complex interwoven nature".

Allco is planning to slash another 220 more jobs as well as quitting its rail leasing and remaining real estate operations.

© 2008 The Age

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