Funtastic Announces $8.5million Exposure To Abc

The Age

Tuesday November 18, 2008

VANESSA O'SHAUGHNESSY, INVESTMENT REPORTER, and DAN HARRISON

CHILDREN'S toy company Funtastic has announced an $8.5 million exposure to ABC Learning Centres, ahead of the collapsed child-care company's first meeting of creditors today.

The outstanding amount is more than a quarter of Funtastic's market value and, according to a statement, could require a "substantial one-off provision" by the end of the year.

But the amount written down will depend on what administrators tell unsecured creditors today, as well as how much Funtastic can recover from the additional $3.1 million owed by companies that also trade with ABC Learning.

Administrator Ferrier Hodgson expects "hundreds" of people to attend the first meeting of creditors today, including shareholders and employees.

The meeting, which will be held in Brisbane, was called after ABC Learning directors placed the company into voluntary administration this month.

Receivers from corporate recovery specialist McGrathNicol were also appointed.

They continue to manage ABC Learning's 1040 Australian child-care centres, with financial help from the Federal Government.

And they represent the interests of a consortium of eight banks that are owed about $1 billion.

Australia's Big Four are owed about $762 million collectively. Commonwealth Bank confirmed a $240 million exposure, plus a remaining $220 million on 4.46 million unsecured hybrid notes that were issued last year. Westpac has exposure of about $200 million, and ANZ and National Australia Bank are owed $182 million and $140 million respectively.

BankWest, Bank of America, Citigroup and Japan's Mizuho Corporate Bank make up the rest of the banking syndicate.

But litigation funder IMF Australia may question the banks' status as secured creditors at today's meeting, citing an "oral agreement" between an ABC Learning company and the banks.

In a statement to the Australian Securities Exchange, Funtastic said it expected to reduce net debt over 2008. But the company, which calculates it has $36.3 million in intangible assets associated with ABC Learning contracts, remains "cautious about the current retail environment and the state of consumer demand in the lead-up to the pivotal Christmas period".

Funtastic shares rose 2, or 12.5%, to 18. They have traded as high as 89 in the past year.

Meanwhile, the Liquor Hospitality and Miscellaneous Workers Union, which represents ABC Learning workers, will send a delegation to the meeting to demand assurances that its members' jobs and entitlements will be preserved. National secretary Louise Tarrant said the union would push the administrator for a report on ABC Learning's finances, an estimate of employee entitlements owed and information on the criteria being used to assess the viability of centres.

© 2008 The Age

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