allco shares rise after debt restructure, page-4

It's all about getting confidence back, but this might take a while. At least the good news is filtering through.

Herald Sun.

Faith in Allco's debt bid


STOCKS in Allco Finance Group surged more than 10 per cent yesterday after announcing it would halve long-term debt within a year.

The Sydney-based manager of ships, aircraft and wind farms announced it had reached an agreement with its banking syndicate on terms for a new senior debt facility.

Allco's new agreement will reduce its senior debt to $400 million by June 2009 - down from $830 million - through the sale of non-core assets after refinancing loans with bankers.

The new agreement will run until September 2009 and does not include any market capitalisation review clauses, stripping bankers of the right to recall loans early if Allco's shares fall.

The Australian asset manager lost more than 90 per cent of its value this year as investors fled indebted companies with complex financial structures following the global credit crisis.

Allco shares were 4c higher, or 10.67 per cent, to 42c yesterday.

But the debt refinancing has come at a cost 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.

Allco managing director and chief executive David Clarke said the company was well on the way to achieving the agreed repayment schedule through the sales on non-core assets.

"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," Mr Clarke said.

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

Analyst for ABN Amro, John Heagerty, said the new agreement would provide more certainty around the financial structure which he said was positive.

"But obviously I still think a lot will happen between now and next year before people get enough confidence in the business again," Mr Heagerty said.