Babcock special: it's all about the big 13 executives
February 2, 2010
Dear Mayne Reporters, if you thought Allco and Centro were big, get ready for a huge shake-out if Babcock & Brown does indeed fall over.
Today's sharemarket route was quite extraordinary and the focus is quickly moving to the financial capacity of Babcock's senior executives to stave off disaster.
We've put together this video from the recent AGM so you can see Babcock CEO Phil Green's body language when he talked about staff shareholdings, margin loans and his reasons for not taking up the recent dividend reinvestment plan. Green's claim that no director was anywhere near having material debts on their shares ignores the fact that another 100 million shares are held by staff who don't sit on the board and the total staff holding is actually 43%.
ABC finance reporter Neal Woolrich reported on Inside Business tonight that some staff are getting into margin call territory and that is what the short-sellers are attacking, especially now that the banks have suddenly got the ability to cancel dividends after the $2.5 billion market cap trigger was hit, sparking this explanation from the financial engineers.
It wasn't that surprising seeing all the various satellites plunge today given the fear of contagion and forced sales by the parent company, but the most telling drop was in those Babcock & Brown unsecured notes which lost 20% to $55.80. Given that the notes rank ahead of equity holders, 55c in the dollar is a very pessimistic outlook.
Selldowns by the big 13 executive shareholders
The 2004 Babcock & Brown annual report makes for pretty interesting reading, especially the lists of executive shareholdings which can be compared with what the big boys currently hold as their baby teeters on the edge. This is what we can tell about who has been selling:
Jim Babcock, executive chairman and co-founder: down from 21.12m to 15.9m after selling 5.22m.
Phil Green, CEO: up from 12.62m to 12.77m
James Fantaci, executive director and global head of operating leasing: down from 8.2m to 4.6m after selling 3.6m
Steve Zissus, heads aircraft leasing: 8.44m to unknown
Peter Hofbauer, head of infrastructure: down from 7.41m to 6.69m.
Michael Maxwell, Asian boss: down from 6.94m to 5.39m
Daniel Brickman, US boss: 6.53m to unknown
Eric Lucas, global head of real estate: down from 5.67m to 4.27m after selling 2.4m
Richard Umbrecht, co-head of structured finance: 5.6m to unknown
Karl Oberrauch, senior property executive: down from 4.35m to 1.45m after selling 2.9m
Tim Duncan, leads European rail: down from 4.04m to 2.69m
Robert Topfer, global head of corporate and structured finance: down from 3.71m to 3.31m.
Martin Rey, executive director and European boss: down from 1.62m to 1.22m
The top 13 Babcock executives owned 96.25 million shares or 41.67% of the 230.93 million shares on issue in late 2004 after the $550 million new raising through the float at $5 a share.
Based on the information in the 2007 annual report, the top 13 have sold at least 18 million shares and the two big sales by the staff as a whole were:
March 9, 2006: B&B staff sold 23.4 million shares at $17.25, raising $403 million.
March 16, 2007: B&B staff sold 19 million shares at $25.20, raising $479 million.
The big question is whether the staff have hung onto this $882 million and are in a position to redeploy it. If they were collectively rich enough, privatisating Babcock itself would surely be an obvious move given that the market has so fallen out of love with the business.
How financially strong is Phil Green?
In trying to establish whether there would be any debt problems on the residual staff holdings, there are two other factors to consider: dividend flow since the float and cash salary draw.
The dividend payments have totalled $1.13 per share so someone like Phil Green has collected $14.5 million in dividends which is much smaller than his gross cash salary and bonuses of about $34 million over the past four years.
However, Green looks particularly vulnerable because he has ploughed into the various floundering Babcock satellites at an enormous rate and currently holds the following:
B&B Infrastructure: 17.78m where the loss must exceed $12 million
B&B Power: 7.08 million where the loss must exceed $15 million
B&B Wind: 4.24 million which should be close to break even
B&B Residential Land: 4 million where the loss must be about $2 million
B&B Communities: 4 million where the loss is more than $2 million
So, it looks like Green has dropped about $30 million backing the various Babcock satellites and based on last night's close of $6.90, his 12.77 million shares in the head stock are now only worth $88 million. Phil really should disclose exactly how much debt he's carrying across all these exposures.
Given that Babcock & Brown relies on its reputation and has been plunged into a financial crisis, it is absolutely clear that Phil Green should resign forthwith. The man who is so pugnaciously associated with all things Babcock has cooked his goose today and should step aside and give someone else a chance to clean up his mess.
You just can't assemble more than $50 billion in debt and destroy more than $3 billion of investor funds and expect to stick around.
Still $72 in front after all this Babcock trading
Whilst I've lost more than $3000 playing in the 10 different Allco-related vehicles, the news isn't quite so bad with Babcock as the trading in the following 9 vehicles, including the market prices after today's slaughter, has left a $72 profit. The biggest gain was from getting out of Babcock itself at the top whilst there are losses in five of the various funds.
Babcock & Brown: bought 55 at $9.66 on May 17, 2005 and 32 at $16.59 on Oct 14, 2005. Sold 32 at $19.82 on May 29, 2006 and 40 at $28.75 on April 13, 2007. Retain 15 worth $103.50 but overall profit $825.
Babcock & Brown Environmental: bought 560 at 90c on May 25, 2007. Sold into parent takeover at 50c. Lost $224.
Babcock & Brown Infrastructure: bought 340 at $1.49 on May 25, 2006. Sold 240 at $1.89 on April 17, 2007. Bought 4065 in February 2008 share purchase plan at $1.23. Sold 4000 at $1.315 on Feb 20, 2008. Retain 196 worth $168. Overall profit $355.
Babcock & Brown unsecured notes: bought 6 at $97 on Jan 2, 2008. Now $55.80 so losing $247.
Babcock & Brown Residential Land Partners Group: bought 600 at 84c on July 27, 2007. Now 36c so losing $288.
Babcock & Brown Wind: bought 315 at $1.60 on May 25, 2006. Sold 227 at $1.93 on June 5, 2007. Retain 117 worth $181 so overall profit $115.
Everest Babcock & Brown: bought 105 at $4.95 on April 3, 2006. Received 331 free shares as part of EBI entitlement offer. Sold 336 at $3.53 for $1166. Retain 100 worth $45. Overall profit $691.
Everest Babcock & Brown Alternative Investment Trust: subscribed to 1497 entitlement at $4.07 a share for $6092 in April 2007. Sold 1497 at $3.56 each for $5309 on May 9, 2007. Lost $783.
Babcock & Brown Communities: bought 370 Primelife shares at $1.40 on November 7, 2005. Now worth 39.5c so overall loss $372.
That's all for now.
Do ya best, Stephen Mayne
* The Mayne Report is a multi-media governance website published by Stephen Mayne with occasional email editions. To unsubscribe from the emails click here.
Today's sharemarket route was quite extraordinary and the focus is quickly moving to the financial capacity of Babcock's senior executives to stave off disaster.
We've put together this video from the recent AGM so you can see Babcock CEO Phil Green's body language when he talked about staff shareholdings, margin loans and his reasons for not taking up the recent dividend reinvestment plan. Green's claim that no director was anywhere near having material debts on their shares ignores the fact that another 100 million shares are held by staff who don't sit on the board and the total staff holding is actually 43%.
ABC finance reporter Neal Woolrich reported on Inside Business tonight that some staff are getting into margin call territory and that is what the short-sellers are attacking, especially now that the banks have suddenly got the ability to cancel dividends after the $2.5 billion market cap trigger was hit, sparking this explanation from the financial engineers.
It wasn't that surprising seeing all the various satellites plunge today given the fear of contagion and forced sales by the parent company, but the most telling drop was in those Babcock & Brown unsecured notes which lost 20% to $55.80. Given that the notes rank ahead of equity holders, 55c in the dollar is a very pessimistic outlook.
Selldowns by the big 13 executive shareholders
The 2004 Babcock & Brown annual report makes for pretty interesting reading, especially the lists of executive shareholdings which can be compared with what the big boys currently hold as their baby teeters on the edge. This is what we can tell about who has been selling:
Jim Babcock, executive chairman and co-founder: down from 21.12m to 15.9m after selling 5.22m.
Phil Green, CEO: up from 12.62m to 12.77m
James Fantaci, executive director and global head of operating leasing: down from 8.2m to 4.6m after selling 3.6m
Steve Zissus, heads aircraft leasing: 8.44m to unknown
Peter Hofbauer, head of infrastructure: down from 7.41m to 6.69m.
Michael Maxwell, Asian boss: down from 6.94m to 5.39m
Daniel Brickman, US boss: 6.53m to unknown
Eric Lucas, global head of real estate: down from 5.67m to 4.27m after selling 2.4m
Richard Umbrecht, co-head of structured finance: 5.6m to unknown
Karl Oberrauch, senior property executive: down from 4.35m to 1.45m after selling 2.9m
Tim Duncan, leads European rail: down from 4.04m to 2.69m
Robert Topfer, global head of corporate and structured finance: down from 3.71m to 3.31m.
Martin Rey, executive director and European boss: down from 1.62m to 1.22m
The top 13 Babcock executives owned 96.25 million shares or 41.67% of the 230.93 million shares on issue in late 2004 after the $550 million new raising through the float at $5 a share.
Based on the information in the 2007 annual report, the top 13 have sold at least 18 million shares and the two big sales by the staff as a whole were:
March 9, 2006: B&B staff sold 23.4 million shares at $17.25, raising $403 million.
March 16, 2007: B&B staff sold 19 million shares at $25.20, raising $479 million.
The big question is whether the staff have hung onto this $882 million and are in a position to redeploy it. If they were collectively rich enough, privatisating Babcock itself would surely be an obvious move given that the market has so fallen out of love with the business.
How financially strong is Phil Green?
In trying to establish whether there would be any debt problems on the residual staff holdings, there are two other factors to consider: dividend flow since the float and cash salary draw.
The dividend payments have totalled $1.13 per share so someone like Phil Green has collected $14.5 million in dividends which is much smaller than his gross cash salary and bonuses of about $34 million over the past four years.
However, Green looks particularly vulnerable because he has ploughed into the various floundering Babcock satellites at an enormous rate and currently holds the following:
B&B Infrastructure: 17.78m where the loss must exceed $12 million
B&B Power: 7.08 million where the loss must exceed $15 million
B&B Wind: 4.24 million which should be close to break even
B&B Residential Land: 4 million where the loss must be about $2 million
B&B Communities: 4 million where the loss is more than $2 million
So, it looks like Green has dropped about $30 million backing the various Babcock satellites and based on last night's close of $6.90, his 12.77 million shares in the head stock are now only worth $88 million. Phil really should disclose exactly how much debt he's carrying across all these exposures.
Given that Babcock & Brown relies on its reputation and has been plunged into a financial crisis, it is absolutely clear that Phil Green should resign forthwith. The man who is so pugnaciously associated with all things Babcock has cooked his goose today and should step aside and give someone else a chance to clean up his mess.
You just can't assemble more than $50 billion in debt and destroy more than $3 billion of investor funds and expect to stick around.
Still $72 in front after all this Babcock trading
Whilst I've lost more than $3000 playing in the 10 different Allco-related vehicles, the news isn't quite so bad with Babcock as the trading in the following 9 vehicles, including the market prices after today's slaughter, has left a $72 profit. The biggest gain was from getting out of Babcock itself at the top whilst there are losses in five of the various funds.
Babcock & Brown: bought 55 at $9.66 on May 17, 2005 and 32 at $16.59 on Oct 14, 2005. Sold 32 at $19.82 on May 29, 2006 and 40 at $28.75 on April 13, 2007. Retain 15 worth $103.50 but overall profit $825.
Babcock & Brown Environmental: bought 560 at 90c on May 25, 2007. Sold into parent takeover at 50c. Lost $224.
Babcock & Brown Infrastructure: bought 340 at $1.49 on May 25, 2006. Sold 240 at $1.89 on April 17, 2007. Bought 4065 in February 2008 share purchase plan at $1.23. Sold 4000 at $1.315 on Feb 20, 2008. Retain 196 worth $168. Overall profit $355.
Babcock & Brown unsecured notes: bought 6 at $97 on Jan 2, 2008. Now $55.80 so losing $247.
Babcock & Brown Residential Land Partners Group: bought 600 at 84c on July 27, 2007. Now 36c so losing $288.
Babcock & Brown Wind: bought 315 at $1.60 on May 25, 2006. Sold 227 at $1.93 on June 5, 2007. Retain 117 worth $181 so overall profit $115.
Everest Babcock & Brown: bought 105 at $4.95 on April 3, 2006. Received 331 free shares as part of EBI entitlement offer. Sold 336 at $3.53 for $1166. Retain 100 worth $45. Overall profit $691.
Everest Babcock & Brown Alternative Investment Trust: subscribed to 1497 entitlement at $4.07 a share for $6092 in April 2007. Sold 1497 at $3.56 each for $5309 on May 9, 2007. Lost $783.
Babcock & Brown Communities: bought 370 Primelife shares at $1.40 on November 7, 2005. Now worth 39.5c so overall loss $372.
That's all for now.
Do ya best, Stephen Mayne
* The Mayne Report is a multi-media governance website published by Stephen Mayne with occasional email editions. To unsubscribe from the emails click here.