Didn't Want To Pry, Says Abc

Sydney Morning Herald

Thursday March 13, 2008

Nick Lenaghan

The Australian Securities Exchange has grilled ABC Learning Centres over further margin calls last week that all but ended Eddy Groves' investment in the company he founded.

The exchange fired off a "please explain" to the embattled child-care provider on Monday about how much it knew about the margin loan arrangements of Mr Groves and other ABC Learning directors.

It wanted to know why ABC Learning failed to find out about trigger points in the loan arrangements that could force Mr Groves and his fellow directors to sell more of their holdings.

In its response to the query, ABC Learning confirmed on-market trades by Mr Groves, his wife Le Neve Groves and ABC Learning's Australian head, Martin Kemp, on March 6 were the result of margin calls.

But ABC Learning was not aware of the trigger points that led to the March 6 trades, the company said in its response that was released yesterday.

Mr Groves, Mrs Groves and two other directors were forced to sell around $52 million in stock last month as result of margin calls, as investors routed their company.

A second round of margin calls last week, as ABC Learning shares dived again, left Mr Groves with only a handful of ordinary shares, while Mrs Groves has none.

The March 6 margin calls forced Mr Kemp to sell another 2.7 million shares, leaving him with 23,659 ordinary shares.

The ASX has asked ABC Learning whether it was aware of the trigger points for further margin calls either before or after the company issued a statement about its directors' margin loans on February 27.

At the time, ABC Learning confirmed four of its directors had sold much of their stake and acknowledged that almost all their remaining investments, of more than 21 million shares, were also held through margin loans.

Two days later the ASX and the Australian Securities and Investments Commission (ASIC), issued a warning to companies about their obligation to disclose margin loan arrangements.

In its February 29 companies' update, the ASX said its listing rules could require a company to "disclose the key terms of the arrangements, including the number of securities involved, the trigger points, the right of the lender to sell unilaterally and any other material details".

But it was up to a company to decide whether a margin loan arrangement was "material" to its operations and particular circumstances, the ASX said.

In its response to the ASX query, released yesterday, ABC Learning said it reviewed the companies' update but took no steps to gather more detail on its directors' margin loan arrangements.

"Having carefully considered the companies' update and the company's position, the company did not seek to receive the information," ABC Learning said.

"The information related to personal financial arrangements of the individuals concerned which was not, and ought not to be, relevant to the company's affairs and operations."

© 2008 Sydney Morning Herald

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