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Administrator spells out future for ABC -

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Administrator spells out future for ABC

The World Today - Thursday, 6 November , 2008 12:18:00

Reporter: Brigid Glanville

ELEANOR HALL: Australia's largest childcare centre has been placed into administration, raising
questions about the childcare places for 100,000 children.

ABC Learning owns 1200 centres around Australia and 25 per cent of long day care is conducted
through those centres.

The Federal Government says it has contingency plans ready to put into place to ensure the centres
will remain open. And the receivers McGrathNicol said late this morning that the centres will
continue to operate as normal.

With the latest reporter Brigid Glanville joins us now.

So Brigid, what have the receivers said this morning about how the children at the centres will be

BRIGID GLANVILLE: Eleanor McGrathNicol are the receivers and Ferrier Hodgson are the administrators
and in a statement, we haven't spoken to anyone, but they did release a statement to the stock
exchange saying that ABC Childcare Centres will remain open and continue to provide care.

There is a quote from Chris Honey who is one of the receivers that has been appointed and he said
he would like to assure all parents and staff that following the appointment of McGrathNicol, their
local childcare centre will continue to operate as usual.

They said the interests of children, family, staff and their entitlements are central to the
considerations in the process and McGrathNicol said they encouraged parents and guardians to
continue their support at their ABC Childcare Centre.

So they said it is their intention to manage the process smoothly and avoid disruption to families.

ELEANOR HALL: Any long-term predictions though about how the centres will operate?

BRIGID GLANVILLE: No, there isn't as yet and they certainly haven't said anything. Ferrier Hodgson
said a meeting of various companies within the ABC Group will be held in less than two weeks.

There is a press conference this afternoon so we may know a bit more then but certainly at this
stage, no information as to long term.

ELEANOR HALL: And what about the Government's role? What has it said?

BRIGID GLANVILLE: The Government has said that it is prepared; it has established a taskforce to
plan for the potential breakup of ABC Learning. It has put contingency plans in place to ensure
that those children won't be left, you know, without a childcare centre.

It hasn't said exactly what it would do but it is believed that it is resisting a bailout as such
of the group as the company, which has about 25 per cent of all long day care places in Australia
receives about 44 per cent of its revenue from government subsidies.

But obviously the Government is under pressure to act to ensure the parents of 100,000-odd children
aren't forced to look for other childcare centres but it could be something in the short term to
maintain that ABC has capital so the centres can continue opening before if someone comes in and
buys ABC Learning.

ELEANOR HALL: Does the collapse of ABC Learning suggest that these centres individually are not

BRIGID GLANVILLE: No, it doesn't suggest that and lots of people have said, in the past few days
commentators have said that ABC Learning, it is hard to imagine not being about to make money out
of childcare centre.

ABC Learning woes stem from much deeper than that and they largely stem from the founder Eddy
Groves and ABC expanding too quickly into the United States and getting too much debt so when the
financial crisis hit, it couldn't repay its debt.

ELEANOR HALL: So what is the likelihood then, if it is a viable business, of a private operator
coming and buying it?

BRIGID GLANVILLE: Well that remains to be seen but you would imagine that if it is a viable
business that someone would come in and buy the business.

ABC as a company has had a number of problems largely because earlier this year when Eddy Groves,
the founder, had a margin call on his shares so his shares were sold from underneath him so that
caused the share price to tumble and I think from the beginning of this year, Eleanor, the share
price has dropped 90 per cent.

In December '06 the share price of ABC was around $8. It last traded at 54c so there is a whole
number of issues over ABC Learning but you would think, largely, that ABC Learning centres are a
good business. A childcare centre, everyone knows it is hard to get children into childcare
centres. There is a very long waiting lists. You would imagine it would be quite a viable business.

But ABC Learning does owe the banks a number of money. All the four major banks in Australia are
involved. The Commonwealth Bank has confirmed it is owed $450-million. ANZ, Westpac and NAB are
owed around $200-million so there is a lot of money and investors out there.

ELEANOR HALL: Brigid Glanville, thank you.