ABC announcement

11 December 2008

Further to our update yesterday, below we provide details regarding the impact of the announcements by the receivers of ABC Learning Centres (ABC) and the Federal Government on the Orchard Childcare Property Fund (the Fund).

Following the completion of its review of all ABC centres yesterday McGrathNicol announced plans for providing a child care place for every ABC child in 2009 and transitioning the business out of receivership.

ABC centres to close or merge

According to the release, 720 ABC centres will remain within the ABC Learning Group with 55 centres to close and be consolidated into nearby ABC centres. Of the 55 centres to close, the Fund owns seven centres as indicated below:

  • ABC Beeliar – 4 Bluebush Avenue, Beeliar Western Australia 
  • ABC Gosnells – 94 King Street, Gosnells Western Australia
  • ABC Quinns Rocks – 14 Duncombe Grove, Quinns Rocks Western Australia
  • ABC Bendigo West (Golden Square) – 92-94 Specimen Hill Road, Bendigo West, Victoria
  • ABC Berwick – 30-62 Ridgemont Drive Berwick, Victoria
  • ABC Deception Bay – 121 Cross Street, Deception Bay Queensland
  • ABC Innisfail Central – Lot 218 Fitzgerald Esplanade, Innisfail Central Queensland

The receivers and managers will continue to make payments whilst these premises are occupied, however we expect the receiver to disclaim the properties before year end. This will allow us to pursue alternative operators or the sale of individual assets. The above centres represent 3.22% of the 217 properties owned by the Fund. By value, these centres represent 3.72% of the total assets of the Fund and 3.48% of the Fund’s annual income. The seven property assets owned by the Fund are also suited to alternate use if the centres are not leased to other child care operators – e.g. residential, medical centre, industrial or education purposes.

ABC centres remaining open under restructure

McGrathNicol announced an additional 64 centres will continue trading into 2009. This number is an improvement on the previously announced 656 ongoing centres, bringing the total number trading as ‘business as usual’ to 720 centres. The receivers and managers will continue to operate these centres and continue to make payments in accordance with the lease. Of the additional centres to continue trading, the Fund owns 13 representing 5.99% of the 217 properties owned by the Fund. These centres account for 7.31% of the total assets of the Fund by value and 7.05% of the Fund’s annual income.

ABC centres remaining open with Government support

A further 241 centres have been identified by McGrathNicol as “unviable under the current business model”. Some of these centres are potentially profitable and may be transitioned out of receivership if operated under an alternative business model. These centres will continue to trade into 2009 under an arrangement also announced by the Federal Government yesterday. The Government has committed to providing up to $34 million of additional funds to keep the 241 child care centres open into the New Year and if necessary until 31 March 2009.

Of these centres, the Fund owns 36 representing 16.59% of the 217 properties owned by the Fund. The centres represent 16.85% of the total assets of the Fund by value and 17.97% of the Fund’s annual income.

Further information

During the review process we have been proactively engaged in discussions with McGrathNicol, Government, and the Fund’s financier - Bank of New Zealand Australia to ensure the best interests of investors are looked after.

The announcements are viewed as a positive step in moving ABC out of receivership and into a sustainable business. Yesterday, Chris Honey of McGrathNicol confirmed “We are in a much better position than we could ever have imagined just four weeks ago when we were first appointed as Receivers and Managers. We can now shift our focus to transitioning the new ABC Learning Group business out of receivership in 2009”

  • To view a copy of the McGrathNicol announcement please click here.
  • To view a copy of the Federal Government’s announcement please click here.
  • A list of all ABC centres and their classification is available on ABC’s website.

We will continue to keep you updated on our plans for the Fund. In the meantime, if you have any questions about the Orchard Childcare Property Fund please contact Orchard Investor and Adviser Services on 1800 008 494.