Allco Plunges as Margin Lenders Force Sale of Shares (Update1)...

Allco Plunges as Margin Lenders Force Sale of Shares (Update1)

By Brett Miller

Jan. 23 (Bloomberg) -- Allco Finance Group Ltd., an Australian manager of assets including ships and aircraft, slumped 26 percent in Sydney after margin lenders forced share sales.

The company is in talks with lenders to stop further sales, it said in a statement after today's rout, which took the stock's decline from its record in February last year to 83 percent.

Allco's slide contrasts with a 1.3 percent gain for Macquarie Group Ltd., Australia's largest investment bank, and the 7.7 percent increase in Babcock & Brown Ltd., the second largest. Investors including Paul Xiradis said the company's debt was also a concern to investors.

``People are concerned about highly leveraged organizations and Allco can be put into that camp,'' said Xiradis, who helps manage the equivalent of $11 billion at Ausbil Dexia in Sydney.

Allco and its subsidiaries have A$1.08 billion of bonds and loans due this year and a further A$1.28 billion maturing in 2009, according to Bloomberg data.

The company didn't identify the four margin lenders it said had control of 45.8 million Allco shares via the Allco Principals Trust. Allco has 367.7 million shares outstanding, according to data compiled by Bloomberg.

``This sale is not reflective of Allco Finance Group's business, performance and prospects,'' the statement said.

The value of Allco Chairman David Coe's 6.8 percent stake in the company was cut by A$19.5 million today, according to Bloomberg data. Chief Executive Officer David Clarke's shareholding was reduced by A$120,000.

``In the financial engineering sector, it is viewed as the least robust in terms of its underlying investments, and it's viewed as having the most difficulty in accessing credit,'' said Angus Gluskie, who helps manage the equivalent of $500 million at White Funds Management in Sydney. ``It has higher risk prospects than Macquarie or Babcock & Brown.''

To contact the reporters on this story: Brett Miller in Sydney on [email protected]

Last Updated: January 23, 2008 03:29 EST