receivers prepare to offload allco crown jewel

Receivers prepare to offload Allco crown jewels

Danny John
December 27, 2008

THE debt-stricken Allco Finance Group will leave 2008 a much-reduced shell of the mightily-confident company that entered the year, with its receivers now close to selling its two most valuable remaining assets.

Detailed memorandums have already been sent out to potential purchasers of Allco's aviation and shipping fleets, which were once considered core operations of the group and would have formed the basis of a much smaller listed company if it had avoided collapse.

But the decision of the company's beleaguered board to appoint administrators seven weeks ago - a move which swiftly prompted its bankers to bring in the receivers - changed all that.

The group is now being dismembered to pay back its lenders owed more than $600 million.

Aviation leasing provided the genesis of Allco when it opened for business in the early 1980s, and shipping became its second most important platform from which it eventually fashioned itself into a worldwide group worth almost $4.6 billion on the stock exchange at its height two years ago.

By the time of its collapse on November 4, however, Allco's shares had been suspended at a paltry 14 cents, valuing the group at just $52 million.

And now the 26-year-old aviation operation that leases more than 60 Boeing, Airbus and Embraer passenger aircraft to some of the best known global carriers including Emirates, Singapore Airlines, Air France-KLM and British Airways is on the chopping block.

The fleet cost $US3.4 billion ($4.9 billion) to assemble but the question for Allco's receivers, Ferrier Hodgson, is what it will actually get in bids which will be based on the leasing contracts that the group has.

One of the advantages in selling the portfolio of aircraft is the relatively youthful age of the fleet - nearly 70 per cent of it is less than four years old.

The average leasing term is about eight years, which will provide buyers with a solid medium-term income stream, while the newness of the fleet should offer a buffer against the current trend of airlines grounding older, more expensive planes in the face of the global recession.

The 56-strong fleet of shipping vessels, primarily freighters, container ships and LNG carriers, should also prove attractive despite the downturn given longer-term forecasts for growth in the industry.

Allco has also proven to be a long-term investor in bringing new capacity onto the world's shipping lanes. It has 15 vessels - out of the total of 56 - under construction, with two due for delivery next month.

The rest are due to be completed at just over one a month on average over the following year, with the last two ships set for delivery next December.

Such prospects all but guarantee the sale of both divisions in the next couple of months, with the receivers now discussing expressions of interest with likely buyers.

"There is a high level of interest in acquiring these businesses and [we] are confident [we] will conclude a sale early next year," said the receiver, Peter Gothard, this week.