Allco Finance to Sell Non-Core Assets, Shares Dive
Allco Finance Group, a troubled Australian asset manager, said it planned to sell its non-core assets, following a business restructure, in order to cut its debt due to high funding costs.
Its shares tumbled as much as 66 percent to A$1.02 on resuming trade following a two-week suspension. Allco also reported a 14 percent drop in first-half profit.
The group said it was in constructive discussions with banks to restructure its debt facilities, adding the proposed restructuring was being viewed positively by its senior lenders.
The restructuring would enable the company to focus on its core aviation, shipping and real estate assets, while exiting its infrastructure and financial assets, Allco said in a statement.
"These areas contributed strong revenue ... and provide a good underpinning for our future strategy," said David Clarke, Chief Executive Officer, in a statement.
Allco core's business contributed about 76 percent to its first-half revenue.
Its shares were hammered last month on concerns about high debt levels and its opaque business model, and talk has circulated that the group is in sale talks, and that its lenders had called in a corporate restructuring team.
Allco also said it had agreed to sell its stake in Consolidated Edison portfolio to Australian pension fund manager Industry Funds Management.
In December, Allco along with Industry Funds had bought several generation projects from Consolidated for nearly $1.5 billion.
Clarke said Allco was not in breach of financial covenants and the company has never been late in meeting its interest payments.
He said the fall in Allco's market capitalization had provided a trigger for banks to review senior debt facilities.
Allco shares climbed to an all-time high of A$12.61 in May 2007, giving it a market value of A$4.6 billion, compared with its current market value of about A$500 million.
Allco said it had a A$250 million bridge facility maturing in May and another A$900 million in senior debt would need to be repaid.
"We emphasize that notice has not been given at this time and there has been no indication from our banks that they intend to accelerate repayment of facilities," Clarke added.
Allco, which earns the bulk of its revenues by leasing aircraft and ships, has been growing its specialized funds management business by selling down assets from its balance sheet.
But its efforts to establish a global transport and infrastructure fund received a set back after a domestic institutional investor walked out earlier this month, after previously agreeing to commit A$200 million.