Maurice Blackburn Lawyers will commence a shareholder class action against Allco Finance Group Ltd today in Sydney's Federal Court.
Allco operated a financial services business specialising in structured asset finance, funds management and debt and equity funding, and was a major player in the leasing of aircraft, ships and other vehicles. As the global financial crisis developed, investors were concerned about Allco's exposure to that crisis.
After stating in August of 2007 that there was nothing wrong with the company's position, and releasing its annual results, Allco later admitted in February 2008 that it had, six months earlier, understated its current liabilities by around $1.9 billion.
The class action will focus on two main arguments:
- between August 2007 and February 2008 Allco did not disclose its true current liabilities to the market;, and
- from 1 November 2007 onwards, Allco should have informed the market of a review clause in the facilities with its lenders.
Allco will be the primary defendant in the case. Allco's auditors KPMG are also being sued over the misstatement of current liabilities in the 2007 Annual Report.
Class Actions Principal at Maurice Blackburn, Andrew Watson, says that shareholders were kept in the dark and lost millions of dollars as a result of Allco's conduct.
"In the midst of a credit crisis, accurate information about Allco's debt position was vitally important to investors, and from August 2007 until February 2008 Allco didn't keep the market properly informed. Investors deserved better," Mr Watson said.
There was a review clause in Allco's facilities with its lenders that allowed the lenders to call in Allco's debt or renegotiate its terms if Allco's market capitalisation fell below $2 billion. Effectively, a review event would put the company in the hands of its lenders.
Between August and December of 2007, Allco's share price plummeted, triggering a review event on 18 December, before bouncing back. Allco did not inform the market of this review event. Instead, on 19 December, Allco issued a statement reassuring the market about its debt position.
By 8 January 2008, Allco's share price had again dropped, triggering a further review event which continued. Once again, no announcement was made to the ASX until 25 February 2008, at which time the share price plummeted by $1.95, or almost two-thirds of its value.