allco shares rise after debt restructure

FUND manager and leasing financier Allco Finance Group has refinanced its senior debt facilities with the company's standing banking syndicate.

The 12-bank syndicate has agreed to refinance all of Allco's senior debt, which is expected to be run down from $691 million to $400 million by June 2009.

The new facility will operate until September 30 2009, and does not include any review of Allco's market capitalisation.

Allco shares were six cents or 16 per cent higher at 43.5 cents at 2.20pm (AEST), giving it a market value of $164.2 million.

The debt refinancing has come at a cost however, with Allco agreeing to pay a 2.75 per cent margin over the relevant borrowing reference rate on senior debt totalling up to $400 million.

It will also pay a 3 per cent margin on senior debt totalling between $400 million and $600 million, and a 3.5 per cent margin on senior debt totalling more than $600 million.

Allco said its relevant borrowing reference rates - which were not broken down as per standing debt facilities - are BBR for Aussie dollar denominated debt, EURIBOR for Euro denominated debt and LIBOR for US dollar denominated debt.

"Despite the very difficult conditions being experienced in world financial markets, including higher debt margins reflecting the tougher credit climate, we are achieving key milestones in lower gearing levels,'' Allco chief executive David Clarke said.

"We are well on the way to achieving the agreed repayment schedule expected to result in our senior debt reducing to $400 million by June 2009 through sales of non-core assets.

"We have a long-term sustainable and leaner business model, and a simplified corporate structure.''

On June 17, Allco announced it had sold one of its best assets, a US-based windfarm, to a US consortium for $US325 million ($335 million).

Allco director of external relations Christine Bowen said information on the syndicated bank participants remained private.

But she said that by the end of this month the standing members - which are domiciled in Australia, the US and Europe - would have a currency exposure of about 80 per cent Australian dollars with the remainder in US dollars.

"The target is to reach that $400 million by June next year,'' Ms Bowen said.

"That's our balance sheet senior debt facility, and we also have $350 million in notes and then we have non-recourse debt associated with our operating lease business.

"Certainly the target is to get to that $400 million, which we believe is a sustainable level.''

Allco is divesting on-balance sheet assets, and is completing already agreed upon deals.
Allco intends to remain in its original aircraft leasing business.

Ms Bowen said forward commitments had been taken up during the year and would continue until early 2010.

"Getting the banks across the line today allows us to go and talk to operating clients about further aviation, shipping and rail leases,'' she said.

"They vary on the type of plane, the type of train.

"Each plane differs in value, and the way we help our operating clients is we'll go and buy a plane on their behalf so they don't have to carry it on their balance sheet.

"We will organise for the purchase of that through some equity and debt through asset banks. That's the non-recourse component. And then the client will pay a lease or rental stream.''