another article from smh

Scramble to keep Allco afloat
Email Print Normal font Large font AdvertisementDanny John and Stuart Washington
February 22, 2008

BANKERS are working to a tight deadline to approve a new business plan for the debt-challenged Allco Finance Group which would pull the company back from the brink of insolvency.

A syndicate of at least 10 banks, led by the Commonwealth, are desperately trying to avoid putting Allco into the hands of administrators. But their decision to refinance a key part of its debt depends on a business plan being compiled by corporate restructuring specialists Ferrier Hodgson that will state whether a revamped Allco can remain a going concern.

Such a conclusion from Ferrier would allow Allco's beleaguered directors to sign the group's latest half year accounts, triggering both their much-delayed release and a sale of assets to pay off debt.

According to sources close to negotiations over Allco's future, this could result in the banks agreeing to refinance the most pressing part of the $1.1 billion in short-term debt: a $250 million loan due to expire on May 1.

Allco is understood to have put the view that even after meeting all its debt obligations, it has more than $1 billion in assets. Businesses inside Allco include not only aviation and rail leasing businesses but hard assets such as $500 million in property, which were due to be spun out into separate funds before Allco was caught out by the credit crunch.

One syndicate member told the Herald yesterday: "They are working towards a number of announcements - I think that they have got good assets and lots of other things they are looking at doing."

The finely-balanced talks would resolve the board's quandary over Allco's interim results, given concerns over what have been described by sources as "solvency issues".

Publication of the figures have been delayed twice in the past week, despite market announcements which indicated that they had been signed.

Following questions put to the company by the Herald on Wednesday about its financial state, Allco chief executive David Clarke responded that the accounts were still being finalised and that the group had until next Friday to do so.

That means Allco is staring down a deadline of seven days to get the figures ready or face having to release accounts that will have to be highly qualified because of the cash flow concerns.

The negotiations over the group's future have been made harder by the complex nature of the organisation's corporate structure, its links with various listed and unlisted entities and the amount of total debt being carried by the entire operation. In all, the Allco empire is said to owe at least $6 billion.

St George Bank became the latest of Allco's lenders to disclose that it had a $60 million exposure to a $850 million unsecured facility provided by a banking syndicate.

- Another Allco stockmarket satellite, property investor Record Realty, added to the group's woes by reporting a $32.7 million loss for its latest half year.