what is this trading halt for, page-4

November 3, 2008

THE TROUBLED Allco Finance Group is expected to announce today that it has again secured another temporary lifeline from its banks, saving it from collapse but under an ever-increasing tightening of its debt repayment schedule.

Allco has been engaged in make-or-break negotiations with its lenders for the past 12 days after it emerged that its plan to sell assets to pay down its remaining $666 million of borrowings had been scuppered by the fall-out from the global credit crisis.

The group is due to repay $35.5 million and $112 million in two payments this month and next month under a revised deal agreed with its banking syndicate in August. That involves Allco reducing its debt to $400 million by next June.

The company has warned its shareholders that it could be placed into administration if it does not reach agreement to at least roll over the forthcoming monthly repayments.

It is understood the syndicate of leading Australian banks and overseas lenders is sympathetic to Allco's plight, given that possible buyers of the group's businesses are looking to take advantage of its present weakness by lodging much lower than expected offers for them.

Allco has rejected the bids, saying that it is not in the interest of its stakeholders - which include the banks - to sell the operations at those prices. But without the cash coming from the planned disposals, it has, in turn, come up short in trying to meet the next two monthly instalments.

The banks are believed to share Allco's view that they are unlikely to do better than the group's management in the present financial climate in terms of selling assets if they end up taking charge of the company, either through administration or by appointing their own receivers.

Allco was due to reveal the outcome of the discussions on Friday, but these are understood to have gone into the weekend as the two sides seek to reach a new arrangement on what, if anything, the company can pay before Christmas.

An announcement to the Australian Securities Exchange is now expected today, outlining the conclusion of the talks.

Allco's chief executive, David Clarke, told shareholders at the company's annual meeting just over a week ago that he remained hopeful of a successful resolution, although he did not want to guess what that might be.
www.businessday.com

Allco thrown another lifeline

"The bankers are very experienced. They are very familiar with the company now after the past eight to 10 months and are well aware of the issues.

"We think there is a compelling reason why, given what has happened in financial markets [recently], you would defer the repayment of some of these monthly payments."

Mr Clarke said the company had taken a critical view of what it could be expected to get for its assets, which was a "very realistic one" until the meltdown of financial markets in late September and early last month.

"It's not so much the asset values. It's that there are no buyers and there is no such thing as a forced buyer."
The Sydney Morning Herald