Financial planners say they are lucky to have not recommended clients invest in the embattled childcare operator ABC Learning Centres.
"One of my very good clients sold off his childcare centre [to ABC] a couple of years ago," Gilham Financial Management principal Tony Gilham said.
"ABC paid way over the market price for it and he was very happy to sell. That rang in my mind that if they were making all these big offers they were doing it to everyone else."
Gilham had never recommended ABC to clients.
ABC shares dived 43 per cent to $2.14 last month when it reported a 58.3 per cent fall in first-half profit and its high debt levels were exposed.
A $750 million lifeline was given to the childcare operator last week after Morgan Stanley decided to buy 60 per cent of its United States business.
Integro Private Financial Consulting co-founder Troy MacMillan has purged ABC from his firm's approved product list.
"We had considered it due to the expanding growth in the US markets, but as the company became more leveraged we took the company out of our portfolio," MacMillan said.
ABC used to be a five per cent holding in Integro's growth investment menu.
"Anything that has too much exposure to debt at the moment we are excluding from our portfolios," MacMillan said.
Morningstar downgraded ABC from hold in 2007 to sell/avoid on February 28.
The firm's too hard and fast international expansion had stoked ABC with an over-geared balance sheet, Morningstar research manager Andrew Doherty said.
The choice was a good pick among financial planners until the firm's aggressive expansion into the United States and United Kingdom grew over $1.14 billion of debt.
