Eddy Groves says there was never a shadow of doubt in his heart that ABC Learning, the childcare business he co-founded, might not survive.
When ABC Learning’s bankers asked in 2008 for security over the money they had lent the business, Mr Groves said he was not surprised because the global financial crisis had ‘‘changed the world’’.
Mr Groves was giving evidence today in the Federal Court in Sydney at a public examination into events leading up to ABC Learning’s collapse in 2008, owing more than $1 billion.
Michael Cashion, SC, acting for ABC Learning administrator Ferrier Hodgson, asked the now unemployed entrepreneur if the reason the banks required, and were granted, security was because they thought ABC Learning may become insolvent.
Mr Groves said there was ‘‘never a shadow of doubt in my heart’’ that ABC Learning wouldn’t survive.
‘‘I never believed that it would ever be the case,’’ Mr Groves told the court.
Mr Groves said he saw the banks’ request for security in 2008 as a standard procedure during the onset on the global economic downturn.
He said ABC Learning’s disappointing first half financial results, released on February 2008, should not have been a cause of concern for its creditors. On February 25, 2008, ABC Learning reported a 42 per cent fall in first half profit to $37.1 million. The next day its share price tumbled as much as 70 per cent.
‘‘I don’t think ABC’s results were disastrous, they were lower than expected,’’ Mr Groves told the court today.
ABC Learning, then Australia’s largest childcare centre operator, went into administration and receivership in November 2008, owing more than $1 billion.
The examination, which is under privilege and cannot be used to lay criminal charges, is being overseen by ABC administrators Ferrier Hodgson.
Mr Groves also told the court he delayed tax payments in 2008 to ensure the amounts were ‘‘accurate’’. Other creditors had payments go from within 30 days to within 60 days.
Mr Groves said payments were delayed not because of any cash-flow problems but partly to save money on interest.
If the business was going to take advantage of anyone’s balance sheet, it ‘‘sure as hell’’ would be accountants and lawyers, he said.
The examination in Sydney follows a round of examinations in Brisbane late last year. Former chairman David Ryan is expected to take the witness box on Monday.
http://www.smh.com.au/business/collapse-of-abc-never-crossed-my-mind-groves-20100416-sjg3.html
