Allco Finance Group has indicated that it may not meet its debt repayment schedule in the coming months and is now in discussions with its lenders regarding another extension of its facilities.
In August, Allco entered into a new senior debt facility with its syndicate bankers, under which the embattled finance group was required to reduce its senior debt to $400 million by June 30 next year. In September, the group told shareholders it was in discussions with potential buyers regarding the sale of its assets but that there was a continuing risk that “appropriate values” for these assets may not be struck.
This has now occurred, with Allco saying the most recent deterioration in markets conditions had “exceeded the contingencies included in the strategic business plan” that set out anticipated asset sale values. A statement from the group said the directors do not believe it is in shareholders’ best interests to sell the assets at the values being offered.
“Consequently, the directors now believe there is a significant risk that Allco will not be able to meet the debt repayment schedule in its senior debt facility for the months of November and December 2008,” the group’s statement to the Australian Securities Exchange said.
If the group fails to meet a scheduled debt repayment, it will default under its senior debt facility. Allco said this would occur at the end of November 2008 unless its syndicate banks agree to extend the repayment schedule once again.
The agreement of all syndicate banks is required in order to extend the repayment schedule, the Allco statement said. However, the directors said they believe there are “good grounds for the banks agreeing to the extension, given the extreme difficulty in selling assets in the current environment”.
The amounts due at the end of November and December 2008 are $35.5 million and $119.9 million respectively. Allco said it continues to meet its interest payments on its senior debt facility.
