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Allco Finance Group was the biggest gainer on Australia's benchmark index yesterday after the asset manager's largest shareholder reached an agreement to halt further forced share sales.
The Sydney-based manager of assets including ships and aircraft rose 11 per cent to A$3.78. The stock plunged 29 per cent last week after an investment vehicle controlled by past and present Allco Finance executives was forced to sell shares to meet margin calls from lenders.
Allco Principals Investments, which used its stake in Allco Finance as collateral for loans, agreed with its two remaining lenders to halt margin calls for at least seven months, according to a statement from Allco Finance. Two other lenders forced the sale of 22.1 million shares last week, about 6 per cent of Allco's issued capital.
The margin calls against Allco Principals and concerns about the company's debt triggered last week's share slump, which at one point pushed the stock down 83 per cent from its record in February last year.
The company's market value peaked at A$4.87 billion on February 9, compared with A$1.25 billion at the last close on January 25.
John Kinghorn, who helped found the company, said his holding in Allco reached 25 million shares, or 6.8 per cent, on January 23, the same day the stock fell to a 5 1/2-year low of A$1.70.
Allco Finance and its subsidiaries have A$250 million of bonds and loans due this year and a further A$900 million maturing in 2009, according to Bloomberg data.
The halt to margin calls reached with the two remaining lenders will continue until after the company posts its full-year earnings, scheduled for August 21.
National Australia Bank has a A$110 million loan to Allco Principals. The bank said it hadn't forced any share sales.
"Lenders to Allco Principals have recourse only to its assets in the event that its financial position worsens," said Mike Younger, an analyst at Citigroup in Sydney in a note to clients yesterday.
- Bloomberg
