lenders patience running out

Lenders' patience running out


By Richard Gluyas and Adele Ferguson
The Australian
November 06, 2008 12:01am


THE nation's banks are expected to sever the lifelines of more crippled companies.
The collapse of Allco Finance Group and likely demise of ABC Learning Centres signals the start of moves to clean up the mess created by the 15-month financial crisis, The Australian reports.

While one senior banker said yesterday there was little appetite in the industry for more bad-debt provisions, another said that the first half of 2008-09 loomed as a "big write-off period".

The rapid deterioration in the global economy in the past month - reflected in Treasury's decision yesterday to cut Australian growth forecasts for the next two years - has made it much more difficult for companies to trade out of their difficulties and cut asset prices.

And this has hardened the banks' stance against distressed companies.


"Rather than letting these problems linger into 2010, there is a view that what you can get for an asset now will be more than what you will get down the track, with the financial crisis now starting to hit the real economy," one banker said.

Although it was the Allco directors who ultimately sent the company under by calling in McGrathNicol as administrators, sources said the banking syndicate, led by Commonwealth Bank, had made life extremely tough for the company's directors.

The big five Australian banks are owed more than $1.8 billion - much of it unsecured - by Allco and ABC, which was expected to call in administrators last night or today.

The banks are owed another $3.9 billion by the troubled Centro property empire, which has until December 15 to negotiate another debt repayment extension, and $660 million by investment bank Babcock & Brown.

Leon Zwier, a partner at commercial law firm Arnold Bloch Leibler, also cited the importance of "workout fatigue" in bringing longstanding problem loans to a head.

"One of the biggest risks in corporate workouts (like Allco, Centro and ABC) is fatigue," he said.

"Directors, financiers, creditors and all stakeholders become worn out from the complications, pressures and seemingly endless negotiations, and then they throw in the towel prematurely."