NAB 0.87% $23.17 national australia bank limited

exposure a$140m

  1. 32 Posts.
    (Adds Temasek Holdings stake in ABC, statement.)

    By Susan Murdoch

    SYDNEY (Dow Jones)--Australia's largest child-care operator, ABC Learning Centres Ltd. (ABS.AU), was Thursday forced into the hands of receivers after months of escalating concerns over its finances.

    The high-profile failure of ABC Learning follows the collapse of structured financing company Allco Finance Group Ltd. (AFG.AU) earlier this week, as the pair's debt-funded expansion in recent years came unstuck amid the global financial crisis.

    ABC said it had appointed voluntary administrator Ferrier Hodgson while its banking syndicate - which includes international and domestic banks, Commonwealth Bank of Australia (CBA.AU), National Australia Bank Ltd. (NAB), Westpac Banking Corp. (WBK) and Australia and New Zealand Banking Group Ltd. (ANZ) - has appointed McGrathNicol as receivers and managers.

    Westpac confirmed it is owed around A$200 million and ANZ said it has an exposure of around A$182 million to ABC, which has around A$1.2 billion in debt. National Australia Bank said its exposure to the group was around A$140 million.

    The Commonwealth Bank has already written off A$100 million related to ABC listed notes. In December 2007, it committed a further A$280 million as part of a syndicated bank loan.

    "The action (to appoint voluntary administrators) was taken following the directors careful review of the company's future," ABC said in a statement.

    McGrathNicol Partner Chris Honey said the childcare centers will remain open but the boards' decision to appoint administrators indicates the company is insolvent or trading close to insolvency.

    "We are in discussions with the government for the ongoing trading of the childcare centers and we are getting the fullest support from the government and from the group's financiers," Honey told reporters on a teleconference.

    The Australian government last month revealed it had contingency plans in place to deal with the potential collapse of the group, which looks after around 120,000 children and employs more than 16,000 staff.

    The collapse of ABC puts significant pressure on the federal government - which spends hundreds of millions of dollars subsidizing child-care placements - to keep the company running as a going concern.

    Australian Deputy Prime Minister Julia Gillard welcomed news ABC centers will continue to operate as usual but neither Gillard or McGrathNicol would be drawn on whether the government is prepared to financially support the running of some centers.

    Gillard told reporters in Melbourne that the government is in talks with ABC's creditors, and is "working closely" with administrators and receivers.

    "The government's priority is to ensure working families reliant on ABC Learning can continue to access child care for their children and ABC Learning employees have some immediate stability," Gillard said.

    Honey said the receivers have been approached by potential buyers but it was early days and it is not currently in talks with any parties.

    Shares in ABC have been suspended for more than two months as new auditors Ernst & Young work through its accounts for the year to June 30, 2008.

    The protracted delay prompted concern its accounts may be in worse shape than expected. ABC has flagged a pretax loss of A$437 million for 2007-08 and a restatement of at least two prior years' earnings.

    ABC's founder and chief executive, Eddy Groves, resigned from the company in September.

    Since listing seven years ago, ABC had undertaken a debt-fueled buying spree, expanding Groves' empire into the U.S. and U.K.

    Shareholders, including the Singapore government's Temasek Holdings, have had the value of their investment slashed after ABC's shares plunged from around A$5.18 at the start of the year to last trade at 54 Australian cents.

    "We note the serious development announced by ABC Learning Centres. We are monitoring the situation closely and will explore all options available to us," Temasek's spokeswoman Myrna Thomas told Dow Jones Newswires.

    Temasek owns a 12.68% stake and has invested around US$300 million in ABC.

    In April, as the global credit squeeze tightened, ABC was forced to sell a 60% stake in its U.S. operations to Morgan Stanley Private Equity to help pay down debt.

    The group is also facing a potential class action suit from shareholders from litigation funder IMF Ltd.

    Ferrier Hodgson said a meeting of creditors will be held on Nov. 18.

    Ferrier Hodgson's role will be primarily concerned with creditor and shareholder claims, while McGrathNicol, as receivers and managers, will focus on the continued trading of the business.

    -By Susan Murdoch, Dow Jones Newswires; 61-3-9671-4393 ; [email protected]

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