Groves loses ABC after forced sale

EDDY GROVES has lost his grip on ABC Learning. The founder of the child-care group last night revealed he had been forced to sell the bulk of his remaining stake for $26 million, leaving him with a holding worth just $4683 at yesterday's closing price after 20 years at the helm of the company.
Asked whether he had been given an opportunity to put up collateral to avoid the margin calls, Mr Groves, whose personal stake was once almost $300 million, last night told the Herald: "I have no comment on that."
He declined further comment.
Filings with the stock exchange revealed Mr Groves's wife, LeNeve, and another director, Martin Kemp, were also victims of more margin calls on Thursday.
Lenders had already forced Mr Groves, Ms Groves and Mr Kemp to sell shares last month when ABC was sold after a poor half-year profit result and speculation it had breached some of its debt covenants.
Ms Groves sold a stake worth $13.6 million, retaining a holding worth only $19,110. Mr Kemp sold $5.5 million of shares, holding onto a stake worth just $34,800.
Mr Groves returned to Brisbane yesterday morning from a week-long emergency trip to the United States where he struck a conditional deal to sell 60 per cent of the company's North American business for about $750 million in cash and convertible notes.
Analysts have criticised the company for a lack of clarity surrounding the terms of the deal and Citi's Jenny Owen has called for the board and management to resign. While Singapore's Temasek has increased its stake in ABC during the past two weeks, it has declined to publicly express support for Mr Groves.
ABC shares fell a further 14 per cent to close 28c lower at $1.47 yesterday amid more concerns over the terms of the proposed sale of 60 per cent of the US business to Morgan Stanley Private Equity.
ABC's camp denied a Reuters report that suggested banks behind a $1.62 billion debt facility struck in December would approve the US asset sale only if they received a higher margin on the loan.
There were also concerns over the terms of a proposed convertible note issue that would give Morgan Stanley a 10 per cent stake in the company.
Last year ABC issued $600 million worth of so-called "exploding convertible notes" which convert into $100 worth of shares at the trading price when they mature in 2016. But ABC has confirmed it will issue more conventional senior unlisted convertible notes to Morgan Stanley with lower annual interest rate than last year's note issue. The conversion price will be set at a premium to ABC's trading price after it completes the transaction.
Citi estimated the face value of the new note issue would be $240 million.
ABC expects to conclude the deal with Morgan Stanley at the end of April and has given the US group until March 24 to exclusively negotiate final documentation.
But in a presentation on Wednesday, it warned the US asset sale and convertible note issue were both subject to "a number of conditions".