DAVID Coe's Allco entrepreneurial finance group is dead. The cause of death is exactly the same as that of Tricom, the entrepreneurial broking firm of - former - close acquaintance.
Self-destruction of confidence.
And as with Tricom, the only question is the manner of burial. With a particularly exquisite touch in Allco's case.
For the ever-entrepreneurial Macquarie Bank is trying to do to Allco what the two of them in partnership tried last year to do to Qantas.
Nothing nasty - well, not too nasty. Just make a big profit.
MacBank wants to either pick out the best bits from the Allco carcase, leaving the rest to, well, do what residual bits of carcases do.
Or set such a high price for its rescue, that there's nothing much left for continuing Allco shareholders.
Either which way -- or indeed whether a third party can 'trump' MacBank - the Allco which went into a trading halt more than a week ago, is not going to re-appear. Far less, have any sort of future.
It's the confidence, stupid.
At the best of times, you can't do what Allco - and Tricom - have done; and then go seamlessly back to the future as usual.
In today's markets of fear, it is impossible. Confidence is the absolute foundation of any financial institution. Shatter it, and you are dead.
In the case of Tricom it was to fail to settle. Even if it could sustain an argument that failure was technical rather than substantive, there's no coming back.
So Tricom is looking for a partner which can make "a cash injection". Again that likely partner, broking firm Bell Partners, is going to strike a deal entirely in its own - very - best interests.
What it wants is to strip away Tricom's customers and leave all the rest with carcase. Whatever the form of such a deal, the substantive consequence is to bury Tricom.
And the same applies, if worse to Allco. Because it faces the added pressure that the auditors and the directors have to sign off on its accounts.
The only conclusion possible from its failure to release its half-year accounts last Friday, is that either the directors or the auditors or more probably both have refused to so sign.
On the basis they cannot be satisfied of Allco's continuing viability. The proximate reason: it's need to pay approximately $400 million.
If Allco couldn't put its corporate hands on such a sum before it took itself into suspension and was unable to release its accounts, there is no way on this earth that it can now find the money in anything remotely like the normal course.
Allco's first little problem is settling on the purchase of a portfolio of power plants in the US. Up to $200 million is due in March.
Then it has $250 million in a bridge facility from two banks that has to be repaid at the start of May.
In normal times these would not be especially big amounts. These days, they might just as well be $200 billion and $250 billion.
No one is going to provide 'conventional' funding, simply, because of fear. And any provision of 'unconventional' funding is going to be driven by two inter-locking imperatives.
Making the biggest possible profit at the lowest constructible risk. That's to say, to separate out the riskiest stuff and/or claim as much of any remaining Allco equity capital to underwrite any lending.
Coe has a fundamental chicken and egg problem. Directors won't sign off on the accounts until he gets funding. And it's all but impossible to get funding until directors sign off.
In the devastatingly corrosive market conditions, this is a terminal chicken and bad egg.
In the extraordinary event that Allco got funding, it still wouldn't be able to survive beyond the very short term.
It's business 'model' is destroyed. It would just bleed more slowly to death.
A form of 'living death' is a possibility. Where like the former RAMS property lending group, the 'healthy' business - such as it is - goes elsewhere.
And Allco just becomes a shell, taking in money as assets mature and paying it out on liabilities.
The best hope he has is generating an auction. The problem with that is that it would be an auction over the 'good bits'. That would leave the rump-as-carcase.
Should the exchange ask Allco if directors are refusing to sign the accounts? It would be a devastating question.
AFG Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
(20min delay)