Alleasing TrustDirectors reportThe Consolidated Entity also has...

Alleasing Trust
Directors report
The Consolidated Entity also has other borrowings with related parties totalling $130.659m as disclosed in note 21 of the financial statements. These amounts are repayable on 16 September 2008. In addition the Scheme has Preference unit liabilities of $142.306m at 30 June 2008 as disclosed in Note 26 of the financial statements.
In the event that if Alleasing Trust is unable to sell Alleasing Pty Ltd or the price achieved from any sale is insufficient to meet the obligations of Alleasing Trust, and these obligations become due and payable, the Directors would call on AFG, under the letter of support provided by AFG on 30 November 2007, to provide financial assistance to enable Alleasing Trust to meet its debts as and when they fall due including in particular the obligations of Alleasing Trust to pay principal amounts in respect of the redemption of the Alleasing preference units.
The directors are of the view, based on legal advice, that AFG is obliged under the Letter of Support to pay any shortfall in the assets of the Consolidated Entity necessary to meet the obligations of Alleasing Trust and the entities it controls, including the obligation to pay the principal amounts and all coupons payable on the preference units issued by Alleasing Trust, and the obligations as guarantors of the Alleasing Hybrids.
However, the directors have been advised that AFG does not agree that it has an obligation under the Letter of Support to meet any shortfall in the payment of principal amounts payable on the redemption of the Alleasing preference units on 17 August 2009.
Although the directors of AMIFL disagree with AFG’s position, they recognise that the resolution of the disagreement with AFG on reasonable terms is likely to be in the best interests of holders of the Alleasing Hybrids. A formal dispute resolution process for recovery under the Letter of Support is likely to be costly and time-consuming, and the damages recoverable by the Scheme are likely to be less than the total amount payable on redemption of the preference units.
There is also uncertainty about AFG's ability to pay amounts under the Letter of Support, or to pay damages awarded against it. There is therefore significant doubt about the Scheme’s ability to recover the full principal amount of the preference units.
Accordingly, the directors have commenced negotiations with AFG for the allocation of an amount from the proceeds of any sale of Alleasing Pty Limited to the partial repayment of principal amounts on the preference units. At the date of this report, there has been no agreement on the sale of Alleasing Pty Limited, and no agreement between AMIFL and AFG on the allocation of any sale proceeds.