Allco Equity reaffirms backing for IBA Health

Health software company quarantined from financial fallout

Investment firm Allco Equity Partners (AEP) last week said it remained committed to listed hospital software developer IBA Health Group despite the collapse of 36% shareholder Allco Finance Group.

Many New Zelaand hospitals use IBA's software. Computerworld reported recently that Southern Cross, for instance, was struggling to implement a Patient Administration System from IBA. Many district health boards also use the company's software.

AEP also said it had moved to terminate its management agreement with AFG and that its assets and funds were "completely separate" to Allco Finance Group, which collapsed late on Tuesday last week under more than A$1.1 billion (NZ$1.26 billion) in debt.

"The independent directors of AEP have been monitoring the position with AFG closely and have had contingency plans in place to deal with this eventuality," AEP's independent chairman, Ian Tsicalas said.

"There will be no interruption to the business activities of AEP and our investee entities are unaffected."

AEP owns about 26% of IBA and was one of the key financiers behind IBA's £166.3 million (NZ$439 million) takeover of British hospital software group iSOFT — a deal that allowed IBA to become one of the world's biggest makers of patient and clinical systems.

AFG's shaky position and its relationship with AEP has led IBA chief executive Gary Cohen to reassure shareholders on the health software company's financing arrangements several times this year.

On October 30, IBA announced that AEP had extended to June 30 next year a £25 million facility that it had advanced to the software company. As part of the extension the facility was converted to a fixed rate, Australian dollar facility worth $60 million.

"As AEP is independent of AFG, IBA expects no change in the relationship between it and AEP as a result of the events surrounding AFG," IBA representatives said in a statement to the Australian Securities Exchange yesterday.

Cohen, himself an Allco Finance director in the early part of this decade, did not respond to a request for comment by Computerworld's deadline but was scheduled to address shareholders at IBA's annual general meeting in Sydney shortly afterwards.

Speaking at AEP's annual meeting yesterday, the investment firm's managing director Robert Moran said he was "very positive about IBA's prospects".

"In our view, health care is a defensive sector, well suited for current economic times, and investment in a critical service provider to that sector is equally as attractive," Moran said.

"The current share price of IBA would suggest that the equities market is yet to fully accept the investment potential of IBA, but that may well be more a reflection on the equities market than the fundamentals of IBA."

IBA shares closed down half a cent at A66.5¢ on the news. It was trading down about 27% over the year.

— Australian Financial Reveiw

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