At least ABC learning put something substantial to the market in the form of a statement and suggestion of a possible deal in the offing.
Yes, it was a statement suggesting something that may not happen: but it was more definite than the swirl of rumours, yet again around AFG.
It was a very different story with Allco Finance Group where we got yet another round of whispers and gossip about a possible buyout, just as this stock and those of its associates have been chatted about by investors for months with very little substantive information flowing to the public that was positive.
The delays to the release of what were laughingly called interim financial results this week were well telegraphed by ‘market chat’ as was their release on Monday.
The thumping given to the shares Monday and Tuesday saw the gossip lines close down, but yesterday morning they re-opened with talk of a white knight buyout bid that would solve the problems.
Well, maybe.
The story goes: AFG shares rose almost 30% yesterday at one stage on speculation that its founders could team up with a close mate, and a well-heeled financier, to take the struggling company private.
The market was rife with rumours on that an offer would be made for the entire Allco group at $2.00 per share, valuing it at $735.49 million.
There was talk that Allco founders David Coe and John Kinghorn could team up with Macquarie Group Ltd in a management buyout of the group. Kinghorn hasn’t been actively associated with the company for some years, having gone off to do other things, such as sell Rams into the market and walk away with $650 million, only for Rams to fall over and get hit by the credit crunch.
AFG shares jumped, rising 31 cents to $1.25 before easing. They ended at $1.03, up 9 cents. Hardly a ringing endorsement of the rumour.
Mr Kinghorn recently bought a 6.8% in Allco, paying around $100 million. He also invested in the associated company, Record Real Estate..
He is now chairman of RHG Ltd, which is the shell of the old Rams Home Loans Group.
Mr Coe, who is Allco’s executive chairman, is also a significant Allco shareholder. Mr Kinghorn was a mentor to Mr Coe when starting Allco.
Macquarie Bank has been sniffing around the assets of Allco and is reported to have offered a low amount of money for the supposedly high quality aircraft and ship leasing businesses. The offer was rejected.
Allco says it is going to restructure and become a less highly geared, less aggressive group.
But it faces a May 1 deadline to refinance a $250 million bridge facility and it could have to find another $900 million to repay in 90 days time, if given notice by the banks.
It also revealed on Monday that it was facing a potential requirement to repay another $900 million of senior debt in 90 days, if given notice.
Broker Merrill Lynch stopped rating Allco stock on Monday.
"While Allco claims to be confident of successful restructuring of its debt and business, risks remain exceptionally high and with little detail provided on the mechanics of these changes it is impossible to adequately assess Allco’s fundamental outlook at present," its brokers said.
Allco started trading yesterday with a bit of a hiccup after it said it would relaunch its financial reports after it failed to note a reclassification of some of its debt, triggering fresh volatility in the stock.
Allco said it will add a footnote concerning $1.88 billion of its debt to its earning report, released on Monday.
The shares fell 8% in early trade, but then started rising as the well-timed market chat about a possible buyout emerged.
If the buyout for AFG emerges, standby to get knocked down in the rush.The error by the company and auditors, KPMG was not explained.
AFG also attempted to explain why it had not informed the market that a covenant on market capitalisation which had been breached on January 9 when the company’s market cap fell below $2 billion and stayed there. trigger the early possible repayment of a $900 million loan.
AFG said the loan had not actually been triggered because negotiations, which had to remain confidential, were being conducted with the bankers to the loan and had not been completed. They are continuing.
Meanwhile a footnote to an earlier disaster called MFS: part of its business has been rejected by another Queensland financial engineer.
Queensland-based City Pacific says it has ended due diligence of assets held by MFS Ltd’s financial services business, including the MFS Premium Income Fund.
City Pacific chief executive Phil Sullivan said yesterday his company had resolved not to make an offer for any of the assets.
”After considering the merits of any proposed transaction, the board has determined that it would not be in the best interests of City Pacific shareholders or investors to proceed,” he said.
City Pacific said all discussions between the parties had ceased. It confirmed it had no current financial exposure, either as an investor or lender, to any member of the MFS group.
From media reports City pacific wanted to spend as little money as possible and MFS disagreed.
It would seem MFS didn’t want to deal with City Pacific and its attempts to get assets on the cheap. Is it next?
