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time out for allco

  1. 34 Posts.
    Time-out for Allco
    AdvertisementEmail Print Normal font Large font AdvertisementMichael West
    October 28, 2008 - 10:58AM
    Page 1 of 2
    Ever since the credit crunch, the banks have been busy perfecting their security over the so-called Bad Boys: the likes of Allco, Centro and ABC Learning.

    That is, they have sought to prop up the Bad Boys with a credit lifeline in return for a secured charge. In so doing they replace their unsecured negative pledge positions with secured creditor status and therefore rank ahead of shareholders in a wind-up.

    Anybody unfortunate enough to still own shares in the Bad Boys, or foolhardy enough to have waded in for a spot of bargain hunting, should be under no illusion the prospects for the survival of your equity are remote.

    Under company law, a charge that has been taken over a company's assets can be rendered void if the company goes bust within six months of that charge being taken. In the case of some credit meltdown victims, we are approaching that six-month threshold now.

    Once the banks have taken their charges and seen out that six-month period, shareholders can kiss their chance of a return goodbye.

    Shareholders must be aware of this and should put pressure on so-called independent directors to protect their rights. If independent directors deem that the banks are merely perfecting their security and the company has little hope of surviving in the longer term they should appoint a voluntary administrator.
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