CHILDCARE business ABC Learning Centres might have come close to "breaching" a debt agreement, an analyst report has said ahead of a deadline for exclusive negotiations for a sale of US assets.
Speculation about whether ABC had remained within debt obligations was a factor which helped drive down its stock last month.
Some analysts have felt comfortable with statements from ABC, responsible for 2300 centres across four countries, about meeting debt covenants and there is speculation that hedge funds are trying to force down prices by spreading bad news.
Already-battered ABC shares dipped again on Thursday amid rumours that negotiations with US investment house Morgan Stanley for the partial sale of US childcare operations had ceased.
ABC last week reaffirmed talks were ongoing but yesterday could not confirm documentation would be finalised before an agreement with Morgan Stanley lapsed at 2pm Brisbane time today.
The $750 million deal was proposed after ABC surprised the market on February 25 with a fall in half-year profits.
ABC issued an update on February 26 to dispel speculation of breaching debt covenants.
Some analysts had found the profit result, released late in the afternoon, confusing.
Citigroup analysts, talking before ABC's debt statement, said one funding-ratio covenant appeared to have been breached but ABC might have calculated to keep it within agreements.
Citigroup said it would "seek clarity" but ABC co-founder Eddy Groves criticised the research and its release in a later Business Spectator interview.
"We're fine with our banks," he said.
Yet last week Patersons analysts stated: "Our calculations, although using loose assumptions on operating lease expenditure . . . reveal that the company was close to breaching their (funding ratio) debt covenant".
Patersons said ABC would not give detailed covenant calculations.
ABC declined to comment on Patersons' report while reaffirming past debt statements
ABS
a.b.c. learning centres limited
