Credit crunch hits Australia; Allco collapses
Australia-based asset manager Allco Finance has collapsed into receivership with debts of almost AUS$1 billion (US$7.7 billion).
It is Australia’s first major financial group to fall victim to the credit crunch.
The company had its shares suspended on Monday as talks with its lenders entered a crisis point.
After a ‘careful review’ of the situation, the board of directors decided to call in McGrathNicol as voluntary administrators on Tuesday evening.
A statement from board members said they have been ‘shattered’ by the way events have panned out over the past week.
Despite banks tightening up lending practices because of turmoil on financial markets, the board had still believed that it was close to securing a deal with its lenders.
Allco’s bankruptcy follows a nine month fight by its board to pay off crushing debts racked up during a string of top market acquisitions.
Allco’s failure will re-ignite an already heated debate in Australia about poor financial legislation that has allowed companies with complex and opaque structures to continue trading.
Its 300 staff face an uncertain future, and the company’s 20,000 shareholders will lose the small amount of value that was left in Allco’s shares.
Before suspension, Allco’s shares were trading at just AUS$0.14.
Category: Companies News, Insurance News
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