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ABC Learning Centres, Australia's top private childcare operator, said yesterday it is in compliance with all financial convenants, as its shares tumbled 66 per cent.
Dealers said there was talk in the market that hedge funds were shorting ABC stock on concern over its borrowings.
The company, which has expanded rapidly in the United States, said in a statement to the stock exchange it was trading in line with its forecasts.
On its A$1.4 billion ($1.6 billion) syndicated bank loan, ABC said it was in compliance with all covenants. These related to shareholders funds, funding ratios and gearing ratios.
Covenants did not include a market capitalisation or share price covenant, it said, adding that it had made the statement in response to "market speculation and rumours". ABC on Monday reported a 42 per cent fall in first-half profit to A$37.1 million, but reaffirmed its forecast of 15 per cent earnings growth for the full year. It said the result reflected the seasonality of earnings from its US childcare centres, where there was a bias towards the second half.
ABC Founder Eddy Groves holds a 4.3 per cent stake in the company, or 20.2 million shares, according to Reuters data.
ABC said it had no plans to issue equity for 12 months. The stock last traded down 66 per cent at A$1.29.
ABC's shares have lost more than 80 per cent of their value since last May, when Singapore state investment firm Temasek Holdings bought a 12 per cent stake at A$7.30 a share.
- REUTERS