Tricom To Trim Margin Lending Book
The Age
Saturday February 2, 2008
EMBATTLED broker Tricom intends to cut its margin loan book in half under pressure from its lenders.
In an emailed response to questions from BusinessDay, Tricom managing director Lance Rosenberg said the broker aimed to cut its margin loan book to $500 million "in the longer term". He did not specify any short-term target.On Thursday, Tricom said its loan book sat at $950 million, secured against $1.3 billion in equity. For the past week, principle lender ANZ has been helping Tricom pay down its margin loan debt day by day - an uncommon show of patience. When a margin call is made, a single day is usually all the grace given.If ANZ demanded its money immediately, retail investors with margin loans through Tricom could end up with the bill, because, as revealed in BusinessDay on Thursday, Tricom's loans are secured against clients' pooled shares, rather than being secured against the shares of individual clients. Investors, spooked in part by Tricom's problems in its margin loan book, weighed on the broader Australian sharemarket, even as the US market began to recover.Shares in Allco Finance Group made up part of that book, and were sold aggressively - Allco claims improperly - as Tricom was flooded with margin calls on Wednesday.Allco shares were yesterday removed from the approved list of Australia's biggest margin lender, CommSec. That means about 100 investors who borrowed to buy Allco shares will have to pay down their loans until the loan-to-valuation ratio (LVR: the size of the margin loan relative to the shares offered as collateral against the loan) reaches zero.Allco joins Centro and MFS, which have both fallen out of CommSec's favour since the market turned in August.CommSec last month cut MFS from its approved list and will not lend to an LVR of more than 35% on Centro shares.LINK? See the RBA's margin lending statistics at tinyurl.com/22tkr3
© 2008 The Age
Share This