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Troubled ABC Learning Centres is facing class action from angry shareholders who say they've been kept in the dark over the company's financial woes.
The Australian Shareholders Association said it had received countless calls from shareholders incensed by a lack of transparency from ABC executives.
And the shareholder advocates' group believes the case against the besieged childcare operator is strong.
But despite the worrying state of its financial affairs, the company wrote letters to "ABC families" this week, assuring parents children were the company's "highest priority".
They claim the fundamentals of the company remain "strong" and "no centres will close". "The children in our centres remain our highest priority and parents can be assured ABC is more committed than ever to providing high quality early childhood services," a letter said.The future of more than 2000 ABC Learning childcare centres remains in doubt this weekend after the company said it had problems with debt.
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The perils of owning too much debt in the midst of a global credit crisis came back to bite ABC Learning this week. Its shares plunged as much as 70 per cent on Tuesday, carving the value of the company by $760m.
The plunge forced ABC's embattled boss Eddy Groves to consider selling part of the business, with the company's childcare centres in the US likely to be auctioned off to the highest bidder.
Mr Groves was at pains this week to reassure parents that its 1000 Australian centres would not close or suffer financial constraints.
To reiterate his pledge, the chief executive took out expensive advertisements in metropolitan newspapers to allay fears.
But while parents could feel somewhat assured it was business as usual, shareholders remain indignant after watching ABC Learning shares crash from a high of $7.66 last year to as low $1.15 this week.
Shareholders who contacted the ASA yesterday said the company had defied disclosure laws aimed at protecting investors.
"To me their claim has legs and we would encourage concerned shareholders to contact litigation lawyers," ASA deputy chairman Stephen Matthews said.
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- reprinted from NEWS.com.au