Late in November 2007 papers prepared for a meeting of the board of Allco Finance Group showed that the company had available cash of $53 million, and included a projection that it would exhaust its available senior debt by February the following year. Despite this, the company was arranging to lend $50 million to one of its satellites, the Allco Partners Trust, which had run into problems with margin loans.Former AFG deputy managing director Michael Stefanovski was questioned about this and other transactions that took place late in 2007, in an examination by AFG's receiver in the Federal Court in Sydney yesterday.Allco went into voluntary administration in November 2008 after a number of its deals went bad and it was unable to refinance its debt. It went into receivership a few days later.Stefanovski was quizzed by John Sheahan, representing receiver Ferrier Hodgson, about the rationale for the transactions.Allco Partners Trust held investments on behalf of a group of people who had been partners in Allco when it was a private company. Its assets included a substantial holding in AFG.During the second half of 2007 APT was warehousing assets that were to go into an investment fund that was to be listed on the Singapore Stock Exchange. APT was faced with the prospect of margin calls because its investors had geared their exposure and the fund's main asset, AFG stock, was losing value.Allco management spent the months between August and December 2007 looking at various options for dealing with APT's liquidity problem, including selling assets, raising fresh capital from investors or having Allco Finance Group take out the third party lenders. Another option was for AFG to lend APT some money.Sheahan wanted to know why it was only the last of those options that was carried out. Stefanovski said the loan was appropriate. The sale of APT's AFG shares would not have been "in the spirit in which APT was created." APT had been set up so that the partners could co-invest with Allco.He said that if APT or any other Allco fund was not performing it would have brand ramifications for the whole business and it was part of AFG's strategy to support its satellites.He said a loan from AFG to APT was the quickest way of dealing with the problem. The group might not have been able to carry out other solutions in time.The hearing continues today.