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Allco Finance Group, an Australian manager of infrastructure assets, says it may default on its senior debt as soon as next month as the global financial crisis cuts the value of holdings it is trying to sell.
The Sydney company told the Australian stock exchange yesterday that, with A$667 million of senior debt, it might miss payments of A$35.5 million in November and A$111.9 million in December unless its bankers agreed to extend repayment schedules.
Allco's shares dropped 16 per cent in Sydney trading, extending their slump this year to 98 per cent.
In August Allco posted the biggest loss by an Australian company in five years, A$1.73 billion, and bankers forced it to reduce loans after asset values declined.
"There's a high probability that this company won't be around next year," said Geoff Wilson, of Wilson Asset Management in Sydney.
Allco, which in 2007 led a failed bid to buy Qantas, has lost A$2.3 billion market value in the past year. It blamed short sellers for weakening the stock, leading to margin calls on directors' shares that fuelled the decline.
Its strategy of relying on cheap credit to expand by acquiring assets such as wind farms and aircraft backfired as funding became dearer.
Bankers including ABN Amro Holding NV, Westpac and Commonwealth Bank of Australia waived the right in July to recall loans early after Allco agreed to higher interest rates.
Allco is required to reduce its senior debt to A$400 million by next June 30. It has cut debt 39 per cent since December 31, when it stood at A$1.1 billion.
Other Australian firms struggling to repay debt include Babcock & Brown and Centro Properties, which borrowed to expand abroad.
- BLOOMBERG
