Australia’s largest childcare provider, ABC Learning Centres, appears almost certain to be placed into receivership after being unable to come to an agreement with its banking syndicate, which is owed over $1 billion.
Australia’s largest childcare provider, ABC Learning Centres, appears almost certain to be placed into receivership after being unable to come to an agreement with its banking syndicate, which is owed over $1 billion.
ABC, which manages nearly 12,000 childcare centres in Australia and provides care for more than 110,000 children, is facing mounting financial problems. The company’s shares – which have plummeted more than 70% this year – remain suspended as the company’s auditors, Ernst & Young, attempt to clarify a number of problems with the company’s accounts.
ABC has also been trying to renegotiate a loan agreement with its bankers, led by Commonwealth Bank, which is believed to be owed more than $500 million. According to reports, a turnaround plan proposed by the ABC board has been rejected by the banking syndicate.
If ABC is placed into receivership the company’s assets – particularly its Australian business, which is partly underwritten by government childcare subsidies – is likely to be attractive to a number of parties, including private equity groups.
But the messy state of ABC’s accounts is likely to deter some buyers. It is believed that Macquarie Group, Morgan Stanley’s private equity firm and US childcare company Knowledge Universe, have all run the ruler over ABC in recent months.
Even if ABC is placed into receivership, it is likely that the company’s centres will continue to operate, at least in the short-term.
Late last month, Deputy Prime Minister Julia Gillard confirmed the Federal Government is looking at a range of contingency plans in the event that ABC fell over. Queensland Premier Anna Bligh has also instructed bureaucrats to look at options to keep the centres running.
The near-collapse of ABC Learning is yet another blow for founder Eddy Groves, who was pushed out of the company in September. This week, Groves’s ex wife Le Neve launched a $44.2 million claim against Eddy as part of a bitter divorce battle.
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