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Secretary won't outline the A-B-C of bonuses -

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SHANE MCLEOD: The company secretary of ABC Learning is refusing to deny reports that he and other
executives will receive bonus payments from the collapsed childcare provider.

Company secretary Matthew Horton has told The World Today that media reports of bonuses of up to a
quarter of a million dollars are wrong. But Mr Horton would not comment on whether or not ABC
Learning executives will receive extra payments.

ABC Learning collapsed a year ago with debts of nearly $2 billion.

Here's finance reporter Sue Lannin.

SUE LANNIN: Australia's biggest childcare provider collapsed in November last year amid huge debts
after founder Eddy Groves' dreams of world domination were halted by the global financial crisis.

ABC Learning is now a shell company with the receivers McGrathNicol trying to sell more than 700
childcare centres before Christmas. The company is under scrutiny again, accused of getting ready
to pay bonuses to its top executives.

Michael Peters is a lecturer at the Australian School of Business at the University of New South
Wales.

MICHAEL PETERS: This has been a phenomenon now for almost a decade. The greatest example is the
sale of the Wall Street banks where bonuses were payed literally payed days before receivership was
declared and literally days after the taxpayer bailed them out.

The same thing has occurred in Australia in the last 18 months or so because companies were facing
more or less a demise, directors were working extraordinarily long hours, as were senior officers,
and therefore they believed that the terms of their employment should be honoured by the company.

SUE LANNIN: ABC Learning company secretary Matthew Horton refused to do an interview with the World
Today. He denied media reports that he and other top executives, including chief executive Rowan
Webb, were going to receive year-end bonuses of $250,000 each. He refused to comment on whether
they would get bonuses at all.

Mr Horton and Mr Webb were brought in to run the troubled company after Eddy Groves walked away in
September last year. Mr Peters says it's likely they would be eligible for bonuses under their
contracts.

MICHAEL PETERS: The problem is how do you sell it to the creditors? There's an ethical problem
here. It's more or less taking money out of a sinking ship. I'm not sure whether or not that's
ethically the correct thing to do. From a legal perspective, it would appear what they're simply
doing is enforcing a legal contract with the company.

Now whether the company is really solid and solvent enough to pay these fees is the question that
hasn't been answered. This is not an uncommon occurrence. Senior management do get their bonuses
days before receivership and in some cases payments are made during receivership.

SUE LANNIN: And this happened with Allco Finance Group and Babcock & Brown?

MICHAEL PETERS: In both instances there were extraordinary payments made in addition to
remuneration and to be fair to the executives, they did work extraordinary long hours in the last
days of both corporations and they had a claim against the company like a creditor's.

SUE LANNIN: Meanwhile ABC creditors face a long wait to get any money back. The big banks are owed
$1 billion combined and they are the top of the list.

John Walker is from litigation funder IMF Australia. IMF is funding an examination in an attempt to
have smaller creditors placed higher up in the pecking order.

JOHN WALKER: We put in proofs of claim into the administrators, what seems to be a year or so ago
now. Those claims centre on whether or not the company was in breach of its continuous disclosure
obligations and whether the company misled particularly the equity market in its reporting its
financial reporting and continuous disclosure to the ASX.

We had not had a response to that simply because the ABC administrators don't currently have any
money. Unsecured creditors will not get any money from ABC Learning Centres unless the charge that
was granted to the bank syndicate, approximately four months before ABC went into administration,
is set aside.

SUE LANNIN: And this process, as you said, has already taken at least a year, so it's going to be
quite long and drawn out?

JOHN WALKER: Well the examinations hopefully will be concluded by March/April of next year and so
the ABC will be in a position to know whether or not to seek to have the charges set aside. So, and
that process, unfortunately in our simple justice system, could take years.

SHANE MCLEOD: John Walker from litigation funder IMF Australia, ending that report by Sue Lannin.