ABC Learning Shares Plunge on Debt
Repayment Concerns (Update1) ::

By Simeon Bennett
25/02/2008
Source: Bloomberg.com

ABC Learning Centres Ltd., the world's biggest publicly traded owner of child-care centers, had a record one-day fall in Sydney trading after first-half profit slumped, fueling concerns it may struggle to repay debt.

ABC Learning is in compliance with its financial covenants, the Brisbane-based company said today in a statement. Net income fell 42 percent to A$37.1 million ($34 million) in the six months ended Dec. 31, the company said yesterday. The stock plunged 65 percent, cutting A$1.2 billion off the company's market value.

Since its first U.S. purchase in November 2005, ABC Learning has spent $1.06 billion expanding in the U.K., Australia and the world's largest economy. It operates more than 2,300 centers across four countries, almost quadrupling its operation in 2 1/2 years. ABC Learning has A$3.1 billion in loans that mature this year, according to data compiled by Bloomberg.

"This is not an economically viable business in its current form," said Roger Montgomery, who manages about A$200 million at Clime Asset Management Ltd. in Sydney. "ABC was once a very profitable small business. It's now a less-than-mediocre large business," Montgomery said in a telephone interview today.

ABC Learning shares fell A$2.44 to A$1.30 at 11:52 a.m. in Sydney, making it the worst performer on the 1,142-member Morgan Stanley Asia Capital Index.

Chief Executive Officer Eddy Groves started with a single child-care center in 1988. The company's centers look after children from 6 weeks to 5 years old.

ABC Learning joins fund manager MFS Ltd., shopping mall owner Centro Properties Group and asset manager Allco Finance Group Ltd. as Australian companies who have had their market value slashed on concerns about indebted firms with complex structures.

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