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ACIL, preparing to list on the NZX, may move quickly to raise funds

Thursday 25th February 2010

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Australian Consolidated Insurance, the Perth-based insurer planning to list on the NZX, is likely to move quickly to raise more funds after its auditor suggested its survival may depend on a successful capital raising.

NZX this week cleared ACIL’s reverse takeover of Lombard Group, the vehicle it will use to gain a listing on the New Zealand bourse. Lombard shareholders, who have yet to vote on the deal, will get further details of the proposal today, including an independent valuation.

If approved, ACIL shareholders will sell their 42.8 million shares to Lombard, which will then offer some 1.5 billion news shares as consideration for the ACIL shares, or 34.6 Lombard shares for each ACIL stock.  Lombard would make a buy-back offer of about 1.2 cents a share, valuing of the company at about $18 million.

In auditor Grant Thornton’s report on ACIL’s accounts for the year to June 30, 2009, it noted a “material uncertainty” over the company’s ability to continue as a going concern.

ACIL’s liabilities exceeded current assets by almost A$5 million last year, and the consolidated entity’s looming shortfall was about A$7.2 million.  The company’s deferred consideration payments - A$4.2 million for the company and A$6.7 million for the group – are due for settlement next month.

On the ACIL website, the company said it will issue a capital raising document for existing shareholders and new investors for the company, which is to be renamed Insured Group and trade on the NZX. The insurer registered Insured Capital with the Companies Office in August, and IGL has been reserved, according to the licensing authority’s website.

The ACIL group has 18 subsidiaries in insurance broking, underwriting, risk management and insurance premium funding, including Hamilton-based Classic Cover Insurance, acquired last year, which specialises in insurance for classic cars, bikes and specialist vehicles.

“The primary objective of the company is to secure capital as a listed entity to continue its business model of earnings, accretive acquisitions, retire debt and build equity for long term capital growth,” the company said in its 2009 financial statements under a note entitled ‘subsequent events’.

The deal was first flagged in July last year as Lombard Group, the parent of failed finance company Lombard Finance & Investment, had its own accounts flagged by its auditors over an ‘optimistic’ valuation of the finance unit.

Around the same time, ACIL became aware that it might have “contravened one of its borrowing covenants” over its EBITDA ratios, according to the 2009 directors’ report.

In the ACIL 2009 annual report, chairman Wayne Miller said once the deal was completed and the company was listed on the NZX, he doubted the current year’s accounts would be tagged by the auditor.

Miller said he wants to grow the business through further acquisitions in Australia and New Zealand, with a goal to managing a minimum of A$500 million in premiums within three years of the takeover from about A$63 million in 2009.

ACIL posted a profit of A$233,000 in the 12 months through June, up from A$86,000 a year earlier, as revenue climbed to A$10.1 million from A$7.9 million. Miller forecasts earnings will rise to A$1.5 million this year.

Lombard's finance unit was put into receivership in 2009 owing 4,400 investors about $127 million. Debenture holders received their first payment of 6.5 cents in December, and have been told they can expect 17% and 29% of their original investment by 08:38:31receiver PricewaterhouseCoopers.

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