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ABC Learning's collapse could further hurt Bu -

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ABC Learning's collapse could further hurt Budget

Broadcast: 06/11/2008


LEIGH SALES, PRESENTER: The Government's bottom line could be in trouble with the prospect of
taxpayer funds needed to bailout Australia's biggest childcare provider.

ABC Learning receives $1 million a day from the Government through the childcare rebate and has
been placed in receivership.

Staff are worried with leave entitlements frozen they won't get holiday pay this Christmas.

And the Education Minister Julia Gillard won't say whether a further injection of Government funds
will be needed to keep the company going.

Rafael Epstein reports.

RAFAEL EPSTEIN, REPORTER: No word from staff at this ABC Learning Centre in Melbourne.

But many knew this was coming. ASIC was warned in 2006. Last year investment advisors were
cautioning against buying their shares, and then the big hedge funds pulled out their money.

Today, the receivers were called in. But some parents didn't even know.

PARENT: Oh, really. I hadn't heard that. Oh right, that is concerning. If ABC were basically to
close overnight that would obviously create a massive problem.

REPORTER: And the Government needs to pick up the bill?

PARENT: I think the Government needs to step in and provide some kind of support.

RAFAEL EPSTEIN: The end finally came for the company whose shares dropped to over 50 cents from a
high of nearly $9.

PARENT 2: No, I'm not concerned. Well, I hope it's OK because I work. So I need it.

PARENT 3: I do have faith that the Government is going to look after the centre, and that, yeah,
things will be OK.

RAFAEL EPSTEIN: The Government says it's working with creditors, the regulators and its own
insolvency expert. But there are no guarantees that ABC Learning won't need help from taxpayers.

REPORTER: Is it possible for you to say that they can actually keep going for more than a few weeks
without Government money.

JULIA GILLARD, EDUCATION MINISTER: Well, we're working with the banks, clearly, and we're working
with the receiver.

perhaps close to $2 billion of taxpayers money has gone to ABC Learning.

And I would think that if you are the custodian of taxpayer's dollars, you would have some
responsibility to see that those are going to a well run, soundly based company.

RAFAEL EPSTEIN: Deborah Brennan was one of many childcare experts who were sounding alarm bells,
like those in the investment world saying there should have been more questions from Canberra.

Like why the Rudd Government set up a taskforce to deal with the ABC when trading in shares was

For the Minister the blame rests with the Howard government.

REPORTER: Do you think the Government deserves any blame for letting the situation get to where it

JULIA GILLARD: The facts are very clear; they removed the cap, they let the market rip, they let
the market rip in circumstances where they had no work force plans, they had no quality plans, they
had no plans for market development in this area, they just let the market rip through childcare.

RAFAEL EPSTEIN: So childcare centres, like this one, face at best an uncertain future. The Labor
Party blames those that came before them, and they say that this Government did all it could when
it could.

And the corporate regulator; the Minister says they have the Government's full support.

JULIA GILLARD: Government has full confidence in ASIC and other corporate regulators, absolutely.

PROF. DEBORAH BRENNAN: I'm surprised the regulator hasn't looked into ABC Learning either.

RAFAEL EPSTEIN: ABC Learning's founder Eddy Groves managed to attract $3.5 billion from the banks
and other investors.

With nearly half of its revenue coming from the Federal Government, it was all channelled through a
maze of companies closely linked to Eddy Groves.

Investors like the Government of Singapore lost $350 million, and the Commonwealth Bank lost more
than half a billion. But while the creditors may get some money back, it looks like shareholders
will get nothing.

Rafael Epstein, Lateline.