Childcare operator ABC Learning Centres goes into
receivership
By SIOW LI SEN
(SINGAPORE) A Temasek Holdings investment Down Under has gone
under - a victim not just of the credit crunch but also dubious
management.
Childcare operator ABC Learning Centres said yesterday that it
has gone into receivership and appointed voluntary administrators
to help clear a mountain of debt.
Reports are emerging that founder Eddy Groves, who was ousted in
September, ran ABC's operations in such an 'opaque' way that
potential rescuers find the business model hard to decipher.
ABC has also been attacked over related-party transactions. Mr
Groves' former brother-in-law had a A$170 million (S$174 million)
maintenance and renovation contract for ABC's childcare centres,
and the service company lists its principal place of business as Mr
Groves' Brisbane apartment.
Reports yesterday said the directors of ABC - the largest
childcare centre operator in Australia and second-largest in the US
- has appointed Ferrier Hodgson Group voluntary administrator.
Temasek Holdings is ABC's second-largest shareholder. In May
last year, the Singapore investment company spent A$401.5 million
or A$7.30 a share on a 12 per cent stake. Then early this year - as
the stock sank - Temasek increased its stake to 14.7 per cent. This
has since been pared to 12.68 per cent, after ABC completed an A$82
million equity placement in June.
Temasek Holdings spokeswoman Myrna Thomas said yesterday: 'We
note the serious development announced by ABC Learning Centres. We
are monitoring the situation closely and will explore all options
available to us.'
Lazard Asset Management is ABC's largest shareholder with 12.93
per cent, followed by Temasek, then Morgan Stanley.
ABC said the company's banking syndicate has appointed advisory
firm McGrathNicol as receiver, AP reported.
ABC chairman David Ryan said the company's board and management
are 'disappointed' to be in this position but that quality
childcare will continue. The company has almost 1,200 childcare
centres in Australia and New Zealand, and more than 1,000 in the
US, as well as more than two dozen nurseries in Britain.
ABC's debt on June 30, 2007 was A$2.2 billion, up substantially
from A$111 million at the end of fiscal 2004.
The company, which gets a large proportion of its revenue from
Australian government childcare subsidies, has delayed filing
annual results for its latest financial year.
The government is in talks with creditors about ABC's future and
has set up a task force to consider contingency plans to protect
families that use the childcare service.
Potential buyers have been put off by the company's opaque
management, after going through its books.
The Australian Financial Review newspaper said on Wednesday that
instead of developing its own centres, ABC paid a company called
123 Global, run by former ABC executive Don Jones, to buy land,
build centres and run them until occupancy rates were up, before
selling them at a multiple of earnings.
But ABC could claw back liquidated damages if occupancy rates
fell short, booking these as profits. In 2006, Mr Jones was running
123 Careers, which outsourced ABC Learning Centre staff. He paid a
fee to ABC for a 10-year contract, which ABC front-loaded with
payments over three years.
ABC is also said to have bought a toy distributor for A$5
million, loaded it with contracts to supply ABC Learning Centres,
and then sold it for A$46 million.
Trading in ABC's shares has been suspended since Aug 21 as the
company worked to resolve its debts. The shares last traded at 54
Australian cents.
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