Zinifex vote, video and a big Babcock right of reply
February 2, 2010
Dear Mayne Reporters,
First things first, check out this video after 4.30pm as it will go down as one of our better efforts.
The Zinifex-Oxiana merger sailed through with no problems at an EGM of Zinifex shareholders in Melbourne yesterday and it was very interesting to watch the spin in action.
Oxiana shareholders are very dirty that they've been clobbered by the tumbling zinc price, which is the dominant Zinifex commodity, and have lost their much-loved CEO Owen Hegarty, who is being "terminated" as part of this $9 billion deal.
Hegarty wasn't introduced to Zinifex shareholders yesterday but he did appear in this very flashy video, in which he makes the bold claim that "the two plus two is adding up to five".
I had this go at Michelmore during the EGM given that Zinifex shares have tanked from more than $21 to $8.70 in just 11 months, including a 30% slump since the merger was announced. Maybe it should be "2 plus 2 equals 3"?
Former Boral CEO Tony Berg never recovered from his failed promise to double shareholder funds in five years and we'll be holding Michelmore to account, including at the Oxiana EGM coming up on July 18 to approve the name change to OZ Minerals Ltd and lock in the over-sized 11-bloke board.
Audio summary of Zinifex EGM
We've broken up the audio exchanges from yesterday into these three files but it was most satisfying encouraging WA News chairman Peter Mansell to retire, given he's the busiest man in corporate Australia and handled the WA News situation so badly:
Love the new OZ Minerals brand, but how much did it cost and where will it be run from?
Politely telling over-committed Zinifex chairman Peter Mansell to retire once the merger is completed.
Ode to the old Pasminco and challenging Michelmore's big claims
Full audio
Babcock update
Babcock & Brown shares have recovered 10% today, partly on the back of Allco's big $US325 million sale of its giant Californian windfarm. Allco shares have rocketed more than 80% to 55c and this has fed through to Babcock which is hoping to land a crucial $2 billion sale of its windfarm assets later this year.
One other very important factor in the Babcock share plunge is the fact that executives can't buy stock given they are in possession of price-sensitive information about everything from wind farm sales, to the B&B Power bail out and the overall debt negotiations with its 25 bankers.
Babcock spinner Kelly Hibbins confirmed as much in this email exchange yesterday:
From: Stephen Mayne
Sent: Monday, 16 June 2008 10:02 AM
To: Kelly Hibbins
Subject: staff buying
Kelly, are Babcock execs permitted to buy stock at the moment or does the BBP situation and bank discussions preclude it on the basis of possession of market sensitive info?
I think this is material as there would be market expectations of some buying support at the moment if the execs were permitted, especially after UBS flagged a possible MBO on Friday.
Cheers, stephen
From: Kelly Hibbins
Sent: Monday, 16 June 2008 10:08 AM
To: Stephen Mayne
Subject: RE: staff buying
Unfortunately we are not at the present time. Always pretty difficult for us to open a window given the number of things going on here at any one time. There is a lot of pressure from employees particularly offshore to open it so that we can buy as obviously we could make a difference to the share price but not at this stage
Kind Regards
A big response from Babcock
More substantively, Kelly has just emailed through this detailed response to some of the material appearing in our "Babcock package", plus comments made during this interview with 702 ABC Drive presenter Richard Glover last Friday.
Dear Stephen
Your various comments on ABC radio and through the Crikey site last Friday (13 June 2008) are both inaccurate and unduly alarming for investors who look to commentators such as you for informed insight and guidance.
Below please find our concerns with comments published by you in your "Mayne Reporters" note of the same date. These comments largely cover the key concerns we have with your comments on the same subject on Richard Glover's ABC radio program.
“...impending Babcock & Brown collapse” in first para. You have no proof to support such an alarmist statement as none exists. The market capitalisation clause in the corporate debt facility does not constitute a default or breach of covenant; and assets at both the Babcock & Brown Limited level and across the group of independently listed or wholesale funds substantially exceed individual entity borrowings.
“....the banks seemingly in control” para two. The BNB ASX statement issued Thurs 12 June makes it very clear – under the market capitalisation threshold clause (ie where BNB market cap is below A$2.5 billion or currently A$7.50 per share), the banks have no right, other than to consider whether they should call for a review. If a review is called there is a four month discussion period with Babcock & Brown about whether any course of action is required, if at all.
If at the end of the four months, the group's market cap is above the threshold level, the “event” is automatically cured. At the time you made your statement, the banks had not exercised their right to call for discussions and they have not done so to date. Your statement creates a false impression of the position with our banks and is unduly alarming to investors.
“What happens to all these contracts with the banks seemingly in control...”.also in par two. As noted below, Babcock & Brown's corporate facility banks are not in control of any PPP project with which Babcock & Brown is involved.
All the transactions are funded with long term debt with recourse only to the particular asset for which the debt has been provided. There are no guarantees from Babcock & Brown nor have the assets been used as security by Babcock & Brown for unrelated transactions. That is, there is no way that the current market volatility of B&B can entitle any lenders to “take control” of these PPP projects.
Further, Melbourne Showgrounds, Long Bay Forensic Hospital and Orange Hospital are owned by the LSE listed Babcock & Brown Private Partnerships (BBPP) and not Babcock & Brown. BBPP is a separate vehicle listed on the London Stock Exchange which has a strong independent balance sheet and structure (indeed recently completed a successful capital raising) and operates distinctively and separately from Babcock & Brown.
It specialises in owning and managing public private partnership projects and has a market capitalisation of over GPB400 million, with interests in 40 separate projects, including 5 projects in Australia. It actively manages each of its investments and has a strong management team in each of the countries that it operates. Again your comments appear to us to alarm people more than accurately inform them.
“What the hell is a supposedly independent hedge fund doing lending A$432 million in related party deal to Babcock associates...” EBI (the independent fund you refer to) has a clearly stated investment mandate that includes accessing “direct” investments. The investments you refer to are mezzanine debt loans, at market rate for mezzanine debt to specific projects and joint ventures such as those mentioned earlier secured in the normal way and involving other highly credible, clearly non Babcock & Brown related entities.
“Does that mean the $200 m unsecured loan from Babcock & Brown Infrastructure to a Babcock & Brown subsidiary...” par10. This loan was not recorded as at 31 December 2008 as you reported, but six months earlier at 30 June 2008. It was a short term loan related to a transaction to which BBI was a party. The loan was repaid in full shortly after 30 June 2008 at market rate of interest.
You also made indirect comments about the independence of the Babcock & Brown Chair, Elizabeth Nosworthy. We reject any suggestion as to lack of independence. Ms Nosworthy is a highly respected corporate lawyer and independent board member of several leading Australian corporations and community organizations. Her integrity is beyond question.
Babcock & Brown has already responded to the inferences made by others concerning political donations in NSW being tied to the Killalea development. Babcock & Brown makes donations to both the NSW Labor and NSW Liberal parties and in some cases these donations relate to a specific dinner or lunch function so it's completely misleading to try to tie donations to the unrelated Killalea development. It is also worth noting that the Killalea development is undertaken through KCI, a joint venture between Babcock & Brown and Mariner and this joint venture has not made any political donations.
With regards to Killalea, Babcock & Brown responded to a tender from the state government who were obviously keen on progressing the project. At the moment we have no development application submitted and there is no approval in place so to tie political donations to this is a complete nonsense.
In the interests of balance and fairness we request that you publish this letter in the same places that your comments were made last Friday.
Sincerely yours
Babcock & Brown
With shares in Babcock and its funds recovering today, it was unfair to describe the company as having "collapsed" even though the share price certainly has.
Can it survive long term? The debt is clearly a big problem but a big wind deal like Allco's and some asset sales out of Babcock & Brown Power would be very important steps forward.
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.
First things first, check out this video after 4.30pm as it will go down as one of our better efforts.
The Zinifex-Oxiana merger sailed through with no problems at an EGM of Zinifex shareholders in Melbourne yesterday and it was very interesting to watch the spin in action.
Oxiana shareholders are very dirty that they've been clobbered by the tumbling zinc price, which is the dominant Zinifex commodity, and have lost their much-loved CEO Owen Hegarty, who is being "terminated" as part of this $9 billion deal.
Hegarty wasn't introduced to Zinifex shareholders yesterday but he did appear in this very flashy video, in which he makes the bold claim that "the two plus two is adding up to five".
I had this go at Michelmore during the EGM given that Zinifex shares have tanked from more than $21 to $8.70 in just 11 months, including a 30% slump since the merger was announced. Maybe it should be "2 plus 2 equals 3"?
Former Boral CEO Tony Berg never recovered from his failed promise to double shareholder funds in five years and we'll be holding Michelmore to account, including at the Oxiana EGM coming up on July 18 to approve the name change to OZ Minerals Ltd and lock in the over-sized 11-bloke board.
Audio summary of Zinifex EGM
We've broken up the audio exchanges from yesterday into these three files but it was most satisfying encouraging WA News chairman Peter Mansell to retire, given he's the busiest man in corporate Australia and handled the WA News situation so badly:
Love the new OZ Minerals brand, but how much did it cost and where will it be run from?
Politely telling over-committed Zinifex chairman Peter Mansell to retire once the merger is completed.
Ode to the old Pasminco and challenging Michelmore's big claims
Full audio
Babcock update
Babcock & Brown shares have recovered 10% today, partly on the back of Allco's big $US325 million sale of its giant Californian windfarm. Allco shares have rocketed more than 80% to 55c and this has fed through to Babcock which is hoping to land a crucial $2 billion sale of its windfarm assets later this year.
One other very important factor in the Babcock share plunge is the fact that executives can't buy stock given they are in possession of price-sensitive information about everything from wind farm sales, to the B&B Power bail out and the overall debt negotiations with its 25 bankers.
Babcock spinner Kelly Hibbins confirmed as much in this email exchange yesterday:
From: Stephen Mayne
Sent: Monday, 16 June 2008 10:02 AM
To: Kelly Hibbins
Subject: staff buying
Kelly, are Babcock execs permitted to buy stock at the moment or does the BBP situation and bank discussions preclude it on the basis of possession of market sensitive info?
I think this is material as there would be market expectations of some buying support at the moment if the execs were permitted, especially after UBS flagged a possible MBO on Friday.
Cheers, stephen
From: Kelly Hibbins
Sent: Monday, 16 June 2008 10:08 AM
To: Stephen Mayne
Subject: RE: staff buying
Unfortunately we are not at the present time. Always pretty difficult for us to open a window given the number of things going on here at any one time. There is a lot of pressure from employees particularly offshore to open it so that we can buy as obviously we could make a difference to the share price but not at this stage
Kind Regards
A big response from Babcock
More substantively, Kelly has just emailed through this detailed response to some of the material appearing in our "Babcock package", plus comments made during this interview with 702 ABC Drive presenter Richard Glover last Friday.
Dear Stephen
Your various comments on ABC radio and through the Crikey site last Friday (13 June 2008) are both inaccurate and unduly alarming for investors who look to commentators such as you for informed insight and guidance.
Below please find our concerns with comments published by you in your "Mayne Reporters" note of the same date. These comments largely cover the key concerns we have with your comments on the same subject on Richard Glover's ABC radio program.
“...impending Babcock & Brown collapse” in first para. You have no proof to support such an alarmist statement as none exists. The market capitalisation clause in the corporate debt facility does not constitute a default or breach of covenant; and assets at both the Babcock & Brown Limited level and across the group of independently listed or wholesale funds substantially exceed individual entity borrowings.
“....the banks seemingly in control” para two. The BNB ASX statement issued Thurs 12 June makes it very clear – under the market capitalisation threshold clause (ie where BNB market cap is below A$2.5 billion or currently A$7.50 per share), the banks have no right, other than to consider whether they should call for a review. If a review is called there is a four month discussion period with Babcock & Brown about whether any course of action is required, if at all.
If at the end of the four months, the group's market cap is above the threshold level, the “event” is automatically cured. At the time you made your statement, the banks had not exercised their right to call for discussions and they have not done so to date. Your statement creates a false impression of the position with our banks and is unduly alarming to investors.
“What happens to all these contracts with the banks seemingly in control...”.also in par two. As noted below, Babcock & Brown's corporate facility banks are not in control of any PPP project with which Babcock & Brown is involved.
All the transactions are funded with long term debt with recourse only to the particular asset for which the debt has been provided. There are no guarantees from Babcock & Brown nor have the assets been used as security by Babcock & Brown for unrelated transactions. That is, there is no way that the current market volatility of B&B can entitle any lenders to “take control” of these PPP projects.
Further, Melbourne Showgrounds, Long Bay Forensic Hospital and Orange Hospital are owned by the LSE listed Babcock & Brown Private Partnerships (BBPP) and not Babcock & Brown. BBPP is a separate vehicle listed on the London Stock Exchange which has a strong independent balance sheet and structure (indeed recently completed a successful capital raising) and operates distinctively and separately from Babcock & Brown.
It specialises in owning and managing public private partnership projects and has a market capitalisation of over GPB400 million, with interests in 40 separate projects, including 5 projects in Australia. It actively manages each of its investments and has a strong management team in each of the countries that it operates. Again your comments appear to us to alarm people more than accurately inform them.
“What the hell is a supposedly independent hedge fund doing lending A$432 million in related party deal to Babcock associates...” EBI (the independent fund you refer to) has a clearly stated investment mandate that includes accessing “direct” investments. The investments you refer to are mezzanine debt loans, at market rate for mezzanine debt to specific projects and joint ventures such as those mentioned earlier secured in the normal way and involving other highly credible, clearly non Babcock & Brown related entities.
“Does that mean the $200 m unsecured loan from Babcock & Brown Infrastructure to a Babcock & Brown subsidiary...” par10. This loan was not recorded as at 31 December 2008 as you reported, but six months earlier at 30 June 2008. It was a short term loan related to a transaction to which BBI was a party. The loan was repaid in full shortly after 30 June 2008 at market rate of interest.
You also made indirect comments about the independence of the Babcock & Brown Chair, Elizabeth Nosworthy. We reject any suggestion as to lack of independence. Ms Nosworthy is a highly respected corporate lawyer and independent board member of several leading Australian corporations and community organizations. Her integrity is beyond question.
Babcock & Brown has already responded to the inferences made by others concerning political donations in NSW being tied to the Killalea development. Babcock & Brown makes donations to both the NSW Labor and NSW Liberal parties and in some cases these donations relate to a specific dinner or lunch function so it's completely misleading to try to tie donations to the unrelated Killalea development. It is also worth noting that the Killalea development is undertaken through KCI, a joint venture between Babcock & Brown and Mariner and this joint venture has not made any political donations.
With regards to Killalea, Babcock & Brown responded to a tender from the state government who were obviously keen on progressing the project. At the moment we have no development application submitted and there is no approval in place so to tie political donations to this is a complete nonsense.
In the interests of balance and fairness we request that you publish this letter in the same places that your comments were made last Friday.
Sincerely yours
Babcock & Brown
With shares in Babcock and its funds recovering today, it was unfair to describe the company as having "collapsed" even though the share price certainly has.
Can it survive long term? The debt is clearly a big problem but a big wind deal like Allco's and some asset sales out of Babcock & Brown Power would be very important steps forward.
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.