Allco Finance Group (AFG) and its myriad satellites can’t take a trick, really.
Every skerrick of good news is overshadowed by a dollop of bad.
If it’s not nasty banks, hedge funds, sceptical investors, regulators or just fate on the one hand, its margin calls by worried banks, loan discussions, and now currency losses on the other.
Take Rubicon Japan Trust (RJT). It yesterday revealed it had been bitten by the rising yen against the US and Aussie dollar (or is it the falling US dollar). A surprise call of $30 million may be needed ASAP.
That was after Rubicon Europe Trust Group (REU) won temporary breathing space from its margin lender over an outstanding payment due tomorrow.
It wasn’t much space, but anything helps.
But it’s questionable how much help as REU still has to pay an even larger amount by Friday.
REU, which is managed by AFG says its lender, Credit Suisse had waived a margin call of euro 9.9 million ($A16.59 million) due tomorrow.
But in a deal very much like that struck by Rubicon America Trust (RAT) on Friday, REU has agreed to make monthly loan repayments to Credit Suisse until March 2009.
The first repayment of $US34 million ($A36.3 million) is due on Friday. Oh, dear!
Over at RJT they were cursing the forex market and the problems in the US which have pushed the US dollar down to 12 year lows against the yen in the past few days.
The US dollar’s losses against the yen have seen the Australian dollar appreciate.
RJT said yesterday it expects to receive a margin call for about $30 million because of the recent rise of yen against the Aussie.
Naturally being part of Allco, RJT warned it was not at present in a position to meet the margin call, due tomorrow.
It is expecting the call to be made under its foreign exchange hedging contracts with National Australia Bank (which advanced $110 million in a margin loan to the Allco Principals Trust, which is now in administration).
RJT said that if it can’t meet the call there was a risk of default.
RJT had asked for a suspension to trading while it made the statement: after trading the units fell 13.6c or 58% to 9.9c. Almost worthless.
"No margin call has at this stage been received but it is expected that one will be received later today," RJT said in its statement.
"The amount of the anticipated margin call is a management estimate and may vary based on formal notification by NAB.
"RJT is not currently in a position to meet this anticipated margin call in full and is in active discussions with NAB regarding a standstill agreement, under which NAB would forbear from exercising its right to make further margin calls under the foreign exchange hedging contracts."
RJT said if it is unable to reach agreement with NAB there is "a risk that an event of default or potential event of default would be declared".
"If an event of default is declared, RJT’s debt could be accelerated and this may result in RJT being unable to pay its debts as they fall due and pay."
RJT said its distribution for the half year ended December 31 may not be paid, if these events happen.
But, being part of Allco, RJT had another ball in the air: it told the ASX that it was in negotiations with another lender about a funding package to give it sufficient funds to refinance its short term debt.
The package would also allow it to progressively buy-down its foreign exchange contracts but ”no agreement has at this stage been reached”.
Shares of other Rubicon trusts fell, as did those of Allco Finance Group, formerly among their biggest shareholders.
Rubicon Europe Trust fell 14.8% or 5c, to 11.5c, while Rubicon America Trust fell 18,5%, or 2.5c, to 11c.RJT dropped 57%, or 10c to 13.5c.
Allco shares sank 9%,or 2.5c, to 26c.
Like RAT, REU will not make any distributions to securityholders until the full Credit Suisse debt facility, worth about euro 150 million ($A252 million) has been paid in full.
RAT has to pay $US114.00 million ($A121.69 million) to Credit Suisse in August.
We don’t yet know the size of the RJT loan or loans that may be accelerated if it can’t make the margin call.
The travails of the trio of trusts saw margin calls force AFG to sell its holding in them.
The opportunistic Babcock and Brown picked up 5% holdings in each of the three trusts soon after the AFG sale. Bet it wishes it didn’t after the last couple of days.
