Monday, March 3, 2008

Analysts Say Australian Companies Susceptible to Credit Crunch

by Michelle Roberts

Analysts have said that some major Australian companies have come to know that they are also prone to a credit crunch in the global market. These Australian firms never had to face such crisis in the last sixteen years of the nation’s continuous growth surge. The world’s biggest listed child care provider firm, ABC learning became the latest victim in the last week when the share prices of the company nosedived by 43% as investors pulled back seeing the company’s high levels of debt following an unsatisfactory earning statement issued by the company. Eddie Groves, the founder of ABC who was once the favorite guy for the stock market, out rightly lost control over the company owing to the calling back of the loans he took to buy shares.

The company experienced a trading halt for the week owing to that fact that the likely buyers focused on the sale of the company’s assets. Another factor that affected the shares of the company was that market controllers sought to investigate if the investors of the company had been kept updated as the critical situation opened up. Another Australian firm to experience bad stock market performance was Centro, the shopping centre owner, this firm also like ABC learning borrowed amounts to a great extent so that it can expand its business in the US. Allco, the fund manager and transport company also had to suffer from stock market woes, this company in the last year was part of the daring takeover proposal for Quantas.

Economic analysts are of the opinion that Australia enjoyed an uninterrupted growth for as many as sixteen long years which created a generation of executives for whom it meant only an expanding market. The generations of executives who have seen only growth were not fully prepared to face financial turmoil like the credit crunch. The business advisory company 333 Performance Management carried out a study in which it came to know that as many as 20% of Australian firms were in a bad corporate health and 11% more companies are in a dropping corporate health. The Managing Director of the firm, Martyn Strickland, said that the company’s survey came with the result that the old guard companies that had been in the standard S and P/ASX 200 ten years or more were better able to face the current credit crunch crisis in the economy.

The MD further added that the relatively new companies which had sought to take aggressive steps to reap the benefits of the expanding markets found it difficult to come to terms with the credit crunch crisis as they did not have to deal with such crises in the past. Strickland also said that if one goes to the head offices of the private equity firms one can find very few executives there who had witnessed the last crisis in the economy. The remaining of the guys in those firms have never witnessed any downturn and they have been aggressively leveraging on the expanding markets. He elaborated further that these were the executives who were in charge of the companies suffering from the effects of the credit crunch crisis.

 

 

 

Stories related to: Analysts Say Australian Companies Susceptible to Credit Crunch

 

 

Visited 902 times, 1 so far today