Sacked Allco Staff Given Jobs At Rubicon

Sydney Morning Herald

Saturday November 15, 2008

Danny John

THE European offshoot of the Rubicon real estate empire is facing a grim fight for survival despite reaching a deal to take on staff who were sacked five days ago by the receivers of its one-time manager, Allco Finance Group.

Along with its ASX-listed "twins", Rubicon America and Rubicon Japan, Rubicon Europe will, in effect, directly employ Allco's property specialists whose services were previously provided under a management agreement with Allco Finance.

They lost their jobs under an immediate cost-cutting move undertaken by Allco receivers, Ferrier Hodgson, after the asset management business went into administration almost a fortnight ago.

But while all three trusts are close to sorting out their respective staffing problems in Sydney, London, Tokyo and Chicago, Rubicon Europe's continuing debt problems and its desperate need to sell assets to pay back its lenders has been made worse by Allco's fall from grace.

Allco's demise triggered a domino effect, with Rubicon Holdings Australia, the parent company of the business which runs the three property trusts, also going into receivership. It owes $20 million to National Australia Bank.

RHA's failure led to one of Rubicon Europe's main financiers, Credit Suisse, declaring that an outstanding debt facility is now in default and that as a consequence of a revaluation of four loans secured against various properties, it is owed EUR30.8 million ($60 million).

That sum will jump to EUR34 million by January 1, when Credit Suisse can demand the immediate repayment of the money, the trust told the ASX in a statement yesterday.

Such a move will make matters worse for Rubicon Europe's other main debt facility it has with NAB. By losing access to income required to pay back Credit Suisse, it will be unable to meet the interest bill on the Australian bank loan from the first quarter of next year.

The trust has been trying to extend the terms of the NAB loan until the end of this month, after it expired two weeks ago, but without success.

The continuing uncertainty over Rubicon Europe's future will mean that the suspension of trading in its shares - put in place a week ago - will remain until the trust is able to clarify its funding situation. The securities were frozen at half a cent.

However, trading in Rubicon America and Rubicon Japan securities - suspended at 2c and 1.2c respectively - will resume once they are able to confirm that they have formally signed up their new employees from AFG.

Meanwhile, Record Realty Trust, another ASX-listed fund caught up in Allco's failure, has extended the suspension of its shares for a further week until next Friday because it is not able to tell investors how much the group's collapse will affect its business.

* Allco officially owes its creditors $1.15 billion, of which $640 million is due to its banks, $370 million to its subordinated note holders, including Commonwealth Bank, $120 million to unsecured creditors and $20 million to its employees, according to the group's administrators, McGrathNicol. The details were provided by the adminstrators at yesterday's first meeting of creditors.

© 2008 Sydney Morning Herald

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