Chesty NAB chases Allco Principals

Under normal circumstances margin loans are non recourse, allowing the lender to take only the security in the event of default.

Yesterday NAB announced that in light of the fall in value of Allco Finance Group securities, it had exercised its right to take possession of 34.5 million Allco Finance Group shares and 4.1 million Allco HIT shares.

Those shares had been offered by Allco Principals Investments as security for a $110 million margin loan.

Allco Finance Group shares traded at 63 cents before they were suspended yesterday and Allco HIT shares traded at 21 cents before they too were suspended.

On those numbers NAB would be able to recover about $22.5 million, though on recent form shares in Allco and its related entities are in for a hammering when they resume trading.

So NAB faces a loss of at least $88 million on the Allco margin loan and maybe more.

In the statement it issued yesterday - itself somewhat unusual - NAB said it will "pursue all avenues of recovery against Allco Principals Investments and related parties to mitigate its loss".

A bank spokesperson said the loan was not a standard non recourse margin loan.

Directors of Allco Principals Investments said they planned to appoint an administrator and also said the RBS, with a smaller loan over Allco shares, planned to appoint a receiver over the shares it held as collateral.