Directors of two stretched and once prominent, but highly leveraged, companies have concluded they cannot continue to bypass the formal machinery of insolvency. For their lending syndicates it highlights that their options to recover their loans are progressively more shaky as the credit crunch deflates asset values and confidence.
Directors of Allco Finance Group last night called in McGrathNicol as administrators. Allco's lenders promptly appointed Ferrier Hodgson as receivers, and it is the latter that will take control of the disposal of Allco's assets.
The Australian and the Financial Review both report that directors of ABC Learning, the dominant operator of hundreds of child care centres in Australia, will also call in administrators today.
Two months ago Allco reported a senior debt burden, as at June 2008, of $704 million. The company reported a net loss of $1.7 billion for the 2007/08 financial year following impairment charges of $1.4 billion on a range of assets. The company's aim, supported by the banks through the first 10 months of 2008, was to reduce the senior debt to $400 million.
Westpac and CBA appear to be the largest lenders to Allco. Though estimates vary, they are thought to be owed in the low hundreds of millions each in very round terms.
In aviation Allco had a portfolio of 66 aircraft with 21 in the pipeline, or did when it presented its 2008 profit at the beginning of September. In shipping the group has a portfolio of 36 vessels, with 20 more ships on order.
In private equity the group manages $500 million under a long-term management agreement with Allco Equity Partners.
Commonwealth Bank's primary exposure to ABC Learning Centres is through a $450 million subordinated notes underwritten by CommSec in mid 2007.