Bligh's debt blight, Quills, Fairfax, Babcock, Woolies walloped, Westfield's apartment tower, new Rich Listers, SPP profits and much more
February 19, 2010
Dear Mayne Reporters,
Apologies it has taken until the early hours of Sunday morning to get this week's edition out, but we've been flat out with council, speaking and media commitments and thought it was best to wait for the results of the Queensland election and also report back on Friday night's big Melbourne Press Club Quill awards.
That said, there's plenty of meaty material for you to consume.
Enjoy, Stephen Mayne.
Anna Bligh's poisoned chalice as Kev borrows $1.8 billion in three days
Anna Bligh was smiling as broadly as Peter Beattie when she declared victory in the Queensland election tonight. Whilst it was a great victory, a terrific speech tonight and a great moment for Australian women - this will also be one almighty poisoned chalice.
Never before has a government been returned promising so much that simply won't be able to be delivered. The much-vaunted $107 billion infrastructure program is a complete pipe-dream. Queensland is going out the back door financially at a rate of knots and needs a Kennett-style reform program of tax rises, efficiency drives, spending cuts and privatisation.
The only thing that could possible save Bligh's jobs and infrastructure program would be a massive bailout from Canberra. The first step will be the Feds formally guaranteeing all state government bond issues.
Queensland's 32-year-old Labor Treasurer Andrew Fraser got together with the 82-year-old chairman of the Queensland Treasury Corporation, Sir Leo Heischler, and came up with a $16 billion borrowing program for 2009-10 after a record $13.8 billion was borrowed last financial year.
The only hitch is the global financial crisis and the Federal government's guarantee of private bank borrowing which has seen state government borrowing programs virtually stall over the past 6 months.
Canberra could step up and start directly borrowing for the states but there's a big question around how long the Feds can sustain its current borrowing binge.
We've put together this fascinating list tracking every Federal bond issue since Labor assumed office in November 2007 and last week we saw it escalate to record levels with the following:
Friday, March 20: $500m tender for 12 year bonds expiring in May 2021 were sold for an average yield of 4.42% and was 2.5 times over-subscribed.
Thursday, March 19: $300m tender for 90 day treasury notes expiring on June 19 were sold for an average yield of 2.66% and was 8.8 times over-subscribed.
Thursday, March 19: $300m tender for 180 day treasury notes expiring on September 18 were sold for an average yield of 2.59% and was 6.9 times over-subscribed.
Wednesday, March 18: $700m tender for 2 year bonds expiring in June 2011 were sold for an average yield of 2.95% and was 4.5 times over-subscribed.
So as Kevin Rudd and the big-spending Labor machine was inflicting significant damage on Lawrence Springborg's reputation in the last three days of the campaign and dismissing concerns about Anna Bligh's debt plans, the Federal government was simultaneously borrowing an unprecedented $1.8 billion through four separate tenders on Wednesday, Thursday and Friday.
Since the stimulus package was announced on February 3, the Rudd government has borrowed a staggering $8.4 billion - much of it timed to pour into bank accounts in the days before the Queensland election.
At least the Feds publically reveal their bond issues and outcomes, unlike the state governments which are in varying degrees of crisis but simply don't reveal even basic information on the websites of their central borrowing authorities. This is what we've been able to glean about their borrowing intentions for 2009-10 but there is no information about how far behind they've fallen:
Treasury Corporation of Victoria: hoping to borrow $4.35 billion in 2008-09
Queensland Treasury Corp: raised a staggering $13.8 billion in 2007-08, lifting the overall debt figure to $43 billion and was orginally projecting a record $16.3 billion for 2008-09, but is going to fall well short.
NSW Treasury Corporation: a 2008-09 funding requirement of $6.8 billion but all but $4.9 billion was pre-borrowed in a sensible move.
WA Treasury Corporation: latest update as of December 31 forecasts record $6.8 billion borrowing program for 2008-09.
SA Financing Authority: $8.7 billion in loans outstanding at the end of last financial year and is scheduled to borrow more than $2 billion this financial year.
At least WA is getting on with some changes to reduce the borrowing requirement, but most of the Labor states are ploughing on as if debt will freely flow forever.
Wayne Swan's executive pay plans
Last week's edition of The Mayne Report laid out the following eight areas of action required on executive pay in Australia:
* Make it compulsory for licensed fund managers to vote their shares in ASX300 companies and disclose how they vote.
* Require full disclosure of a CEO contract, rather than just a summary of the key terms.
* Any termination payment in excess of $1 million in cash, shares or benefits requires specific binding shareholder approval.
* Restore the pre-existing requirement that all equity issues to senior managers requires specific shareholder approval.
* Rather than giving CEOs an exemption from the three year director election cycle, put them up for election every year so shareholders can directly reflect on their performance and pay.
* Eliminate the outrageous and widely rorted tax concessions for senior executives who get paid with shares rather than cash.
* Require fund managers to disclose their own pay packets by closing the loophole that only sees those technically classified as "executives" revealed in the annual reports of public companies.
* Require all major super funds to disclose their fully audited accounts and pay practices, as occurs with public companies.
After 16 months of dithering, the Rudd Government finally produced some action on Wednesday with these two announcements:
Actions on golden handshakes
Allan Fels to examine executive remuneration
Our initial positive response was revealed in these four radio interviews:
936 ABC Hobart
702 ABC Sydney
2GB Sydney
774 ABC Melbourne
However, having had further time to consider the subsequent avalanche of coverage, the situation really does remain up in the air. Whilst the action on termination payouts is an important step, all we've really got on the rest is a review, albeit one with plenty of detail such as the tax rorting issue.
Allan Fels is an inspired choice, but it will still be up to the government to deliver the necessary reforms and Kevin Rudd appears to be deeply conservative when it comes to offending business. Look no further than the way he has trashed Ross Garnaut on climate change.
Even if Professor Fels and his Productivity Commission comrades come up with some great recommendations over the next 9 months, any government action won't become law until April at the earliest and we won't see it in action until the 2010 AGM commencing in October next year just as the likely election campaign kicks off.
This means it will have taken the Rudd Government's entire first term to implement any reforms on corporate governance. And even then we don't know what will be recommended.
Kohler's unfair attacks on Allan Fels
The commentariat has been all over the place in responding to the government's announcements and Alan Kohler's contributions have been particularly odd.
Business Spectator's KGB interrogation of Fels started off with Kohler asking the professor: "So, Allan, have you ever in your life received a bonus?"
It didn't get much better with these two later efforts:
Kohler: "Can I just go back to the first question I asked you at the beginning of the interview which goes to the question of what qualifies you and your colleagues to investigate this area?"
Kohler: "Allan, do you think it was reasonable of the minister yesterday to name and shame Owen Heggarty (sic) and John Alexander when their companies actually acted within the law on termination benefits as it was?"
This kind of hostile approach does neither Kohler or Professor Fels any justice. Kohler claims to have started Eureka Report to expose the racket that is Australia's investment industry.
Exactly right, Alan, the very same investment industry that has failed to control outrageous looting of shareholder wealth by the CEOs club.
Rather than railing against bureaucrats reviewing this rort and feeling sorry for poor old Owen Hegarty, who trousered an $8.4 million payout just months before Oz Minerals fell into the hands of its bankers, why not get with the program and applaud the government's belated action? Of course the panel should not include a remuneration consultant and a public company director, they have been part of the problem.
There is no better exposer of rent seeking in Australia than Allan Fels. He's exactly the right man for the job and should be supported by widely followed commentators like Kohler.
What doesn't Centro recognise about a shareholder mandate?
The Centro headhunter was in touch on Friday to say that he hasn't recommended me for an interview with the only two remaining long-term directors as they search for numerous new directors to lead Centro Retail and Centro Properties into the future after their debt rollover deal with the banks.
Whilst not definitively rejecting the candidacy, this is still a disappointing development and I explained to the headhunter that it was a major set back in terms of shareholder rights.
As Julia Gillard bangs on about Labor's mandate on unfair dismissal, Centro is clearly not recognising the mandate from last November's Centro AGM when more than 70% of the independent vote went my way (see November 29 edition from last year.)
Obviously the question of recognising a mandate from 435 million votes in favour is a matter for the board rather than the head hunter, so I'll have to take this issue up directly with Centro chairman Paul Cooper.
For some strange reason, the third most popular feature on our website this month has been this 109 second exchange at last year's Axa AGM when Paul Cooper recommended Rick Allert for another three years.
Who is listening and does it have anything to do with the Centro board renewal deliberations? Whatever the case, there will be three public opportunities to catch up with Paul Cooper at the Axa AGM on May 6 in Melbourne and then at the forthcoming Centro Retail and Centro Properties EGMs to approve the bank refinancing deal.
I was expecting to have been announced as a Centro Retail director before all these events and to have been working contructively with chairman Cooper. Alas, Friday's call suggests it ain't going to work out that way and the intended transition from a gadfly outside the tent to someone working constructively inside the tent on governance turnaround situations will have to be deferred.
Oh well, at least this means there will be no constraints at forthcoming AGMs for the likes of Macquarie Airports, Axa, Westfield, Oz Minerals, Rio Tinto and Alumina. As a Centro Retail director I was expecting to have to withdraw from the AGM space and did indeed offer to do this if the board colleagues required it.
John B Fairfax's missed opportunity
John B Fairfax was the guest speaker at Friday night's Quill Awards in Melbourne, but his contribution didn't go down particularly well with the journalists, who are generally a pretty hard lot to please.
There was a lot of talk about quality journalism but JB never really nailed his vision for it and the perception that he prefers outfits that don't heavily resource editorial. There was even a discussion about butchers and "quality meats" as he attempted to explain quality journalism.
The reference to his childhood days at Sydney's elite Cranbrook school didn't exactly project a common touch and he also rather gratuitously had a dig at the lack of quality in television caption writing on a night when both Seven and Nine did lots of pro bono video packaging for the Melbourne Press Club's big event.
That said, I was more supportive than others and still think it would be great to have a Fairfax back as chairman of Fairfax Media once the incumbent Ron Walker retires.
The highlight of his speech was JB's attack on The Australian for publishing details of his personal financial affairs on the front page last Wednesday - the same day another Australian died in Afghanistan. He also took a swipe at News Ltd's use of those fake Pauline Hanson photos.
The Herald Sun's forever polite John Trevorrow, who incorrectly introduced JB as the largest Fairfax shareholder, wisely decided not to have a crack back on resuming the microphone.
Whilst Fairfax's own coverage of the speech said JB was the second largest shareholder, he appears on some measures to have slipped to third.
JB only managed to hand over $12 million buying 16 million new shares in the 3-for-5 rights issue at 75c, which saw his stake slip from 14.6% to 10.63% or 232.5 million shares worth about $250 million.
Privately owned Maple Brown Abbott filed this notice last week revealing its stake has risen from 118.9 million shares or 7.83% to 243.8 million shares or 11.15%.
The Commonwealth Bank also filed this substantial shareholder notice last week lifting its overall stake from 207.3 million shares or 13.64% to 365.5 million shares or 16.71%. However, there appears to be some double-counting with Peter Morgan's 452 Capital which filed this notice declaring it now controls 158 million shares or 7.24%.
The irony of The Australian's revelations about the Commonwealth Bank taking out mortgages over some of JB's properties is that it was also the Commonwealth Bank which took a $20 million-plus charge over Rupert Murdoch's New York pad at the height of his debt crisis in the early 1990. This, of course, still hasn't been reported by any News Corp media outlet.
Finally, we're keen to make contact with any Fairfax Media shareholders about the opportunities which present with the retail component of the 3-for-5 entitlement offer that closes next Friday. Please email stephen@maynereport.com if you're on the register or know anyone who is.
Flights booked for Babcock & Brown creditors meeting
Whilst I was circling Sydney in a Virgin Blue flight from Melbourne at 11am on Friday, March 13, Babcock & Brown raised the white flag and aborted that afternoon's meeting of unsecured noteholders after our Kiwi brethren pulled the plug a couple of hours earlier in Auckland.
This would have been one final opportunity to give chairman Elizabeth Nosworthy a decent spray, but now she's handed over to the administrators from Deloitte.
The first creditors meeting has been called for 11am on Wednesday in Circular Quay and the flights have been booked again, so we're aiming to score a position on the creditors' committee through the status that comes with owning a solitary unsecured note.
Whilst I had some robust battles with Nosworthy at last year's Babcock AGM, the Murdoch press really took it too her last week when the Sunday Mail published this unflattering photo of her taking out the gargage.
Mike Smith, the Drive presenter on Fairfax Radio's 4BC, also let fly with this audio special about Nosworthy after another company she's a directors of, Ventracor, called in the administrators on Thursday. Surely she can't remain chairman of the Queensland Water Commission because there isn't another professional director who has notched up three administrations on major Australian public company boards.
Smith is quite a live wire and we've packaged up all our recent interviews with him here. He also produced this rather amusing number on Wayne Swan earlier in the week.
Westfield's blazes the trail for high rise apartments on Doncaster Hill
Manningham Council is going well and on Friday morning we had a developers breakfast with five councillors, five senior officers, two influential state government planning bureaucrats and most of the big landholders around the booming $1.5 billion Westfield development on Doncaster Hill.
It's amazing what a successful re-launch of Melbourne's best shopping centre can do to the spirits because the main players are increasingly confident about delivering the Doncaster Hill vision for concentrated development around our biggest activity centre.
In perhaps the most striking vote of confidence, Westfield itself has just lodged plans to develop its first ever Australian high rise apartment complex on Doncaster Hill. Whilst Westfield London has a residential component, this is unprecedented for the world's biggest shopping centre owner in its home market.
We've also got the giant Intercontinental Hotels Group committed to delivering Manningham's first five star hotel through a Crowne Plaza across the road from the council offices.
The London-listed IHG operates almost 4200 hotels after adding a staggering 430 in 2008 bringing the total rooms to 620,000 globally. It battles away with Paris-based Accor for the title of "world's biggest hotel chain" and would love to steal some business from the Accor 5 star offering in Mt Waverley.
With the council itself committed to spending $28 million delivering stage 1 of the Civic Precinct, we are talking about a lot at stake for all involved so let's hope the encouraging progress continues.
At last, the media directly links Woolies with the scourge of pokies
It has been a long and difficult campaign for us and Paul Bendat's www.pokieact.org but we've finally got a result with the media directly linking Woolworths with the scourge of pokies.
The most recent push came when Crikey led its March 9 edition with this story pointing out the remarkable dominance of Woolworths and the failure of the media to properly focus on the retailing giant's Victorian operations.
Lo and behold, The Sunday Age following up with a very strong Cameron Houston article on March 15 headlined Woolworths reaping billions from pokies in poorer suburbs.
After previously focusing the attention on minority shareholder Bruce Mathieson, even the Herald Sun's Mick Warner delivered this story
about the paper's biggest advertiser on March 18 which mentioned Woolworths in the first paragraph for a change.
But the best of the lot was the Manningham Leader last Wednesday which led page 7 with a story headlined Woolies cops blast. Yep, that blast was from your correspondent and the quotes were as follows:
Cr Stephen Mayne lashed out at Woolworths, which has a majority stake in the Doncaster venues, saying the machines were causing enormous social damage.
“Woolworths is not serving Manningham well,” Cr Mayne said.
“Our residents lose more at the pokies than they pay in rates and we have two of the top 10 venues in the state - both of which are Woolworths venues.
“Woolworths is causing enormous social damage through this dangerous product and should stop targeting vulnerable citizens with free food, special offers and extended hours just to maximise their profits.”
A bit more of this stuff and then a few institutional complaints about Woolworths potentially failing the screen test for the UN Principles for Responsible Investing and you might see some board members decide its time to sever the pokies link once and for all. That's the plan, folks, we'll just have to see how long it takes.
Profitable capital raisings on the rise
With the market enjoying something of a bear market rally, there are some good opportunities emerging from being a tiny investor in about 650 Australian listed securities. Check out the full portfolio as it stood on March 15.
Yes, yes, the paper losses are $127,457 but we always try to look on the bright side of life, so here is a list of the better plays of late which have produced almost $5000 in gross profits in March:
Wesfarmers: bought 1000 shares in the recent rights issue at $13.50 and sold them for an average $16.80 each, making about $3200.
Tabcorp: Paula and I were both on the register so we put $10,000 into the $5.80 share purchase plan and got out this week for an average $6.23 each, making about $800 for the family.
Commonwealth Office: put $5000 into the share purchase plan at 80c each and sold them for 94c this week, making a net gain of $845.
Current in-the-money capital raising
There is even more potential in the following list but you're always carrying market risk until the stock is actually sold but here is what we're backing:
Newcrest: put $5000 into an SPP at $27 and was expecting to sell on Friday but the allotment has been delayed so am hoping the stock stays above $34 into next week to crystallise a profit of about $1300.
Crown: did the $5000 BPAY on Thursday for the SPP at $4.95 and will be able to sell for a profit of about $1000 when the shares start trading on April 1 if the current price holds up.
Suncorp: was alloted $10,000 worth of shares in the recent capital raising at $4.50 and will book a profit of more than $3000 if the stock holds above $6.00 until the shares start trading next Tuesday.
Fairfax Media: the rights issue is at 75c and with the stock now at $1.05, the paper profit is at 40% on any applications for additional shares that are accepted. Offer closes next Friday but still deciding how much to throw at it.
Axa Asia Pacific: will be putting the maximum $10,000 into the $2.85 share purchase plan given that the stock has since jumped to $3.40, suggesting a profit of almost $2000.
The Mayne Report Rich List
Since we began compiling the Mayne Report Rich List documenting every Australian currently or previously worth more then $10 million, it has grown in numbers and popularity.
The Mayne Report Rich List was born on August 14, 2007 when it only had 345 names. We're now up to 1279 entries, although some are italicised, denoting that they are now longer worth more than our $10 million cut off.
Since inception, 32,986 people have visited and spent time looking at our Rich List which is usually the most popular feature on our site every day.
Here are the latest new entries:
Ben Brazil: investment banker for Macquarie who led the unsuccessful takeover in 2005 of the London Stock Exchange and recently purchased a $16.5 million mansion in Sydney's exclusive Vaucluse as Fairfax's Michael West revealed last week.
John (Strop) Cornell: famous for his role as 'Strop' on The Paul Hogan Show and also a successful hotelier. Married to Delvene Delaney, they sold the Beach Hotel in Byron Bay in 2007 for a reported $65 million, and recently purchased a townhouse in South Yarra for one of his daughters for $1.6 million.
Ross Cribb: the former NSW TAB chairman and TNT general manager sold Jay-R Thoroughbred Stud in NSW, which he established in 1970, to the Sunland Group for more than $14 million in 2004.
Millissa Fischer: president of Altona Magic Soccer Club in Victoria, her company, Kendalle Pty Ltd ran several aged-care facilities around Melbourne's suburbs. Recently she has voluntarily liquidated some homes with debts of around $9 million, but is said to be worth around $18 million.
Amanda and Dipendra Goenka: this husband and wife team are behind the teenage girl fashion stores, Forever New, which opened their 42nd store in Melbourne's Bourke St. Dipendra also runs his own clothing factories in Asia.
Michael Pikos: director of the Brisbane-based developer The Pikos Group, has developed three apartment blocks on the Gold Coast and is looking to purchase a 45-storey, 150 unit project in Broadbeach.
Patrick Quirk: backer of investment group Highland Park and former LionOre Mining founder, has emerged as a substantial shareholder of Mirabel Nickel with holdings of around 5%.
David Sinclair: pathologist and professor at Harvard Medical School, he is a co-founder of Sirtris Pharmaceuticals which was sold to global giant GlaxoSmithKline in 2007 for a reported $1.1 billion.
Andrew Taplin: managing director of Adelaide-based Taplin Group which added to their commercial property interests by purchasing the Mawson Lakes town centre for a reported $26.05 million.
Ken Warriner: co-owner of Ashburton Pastoral Company, 10% stakeholder and CEO of Consolidated Holdings Pastoral Company which has land holdings in Western Australia, Northern Territory, Queensland and New South Wales.
Leanne Wesche: founder and managing director of Fremantle-based Pacco Group. Established in 2004, it is now one of Australia's leading fruit and vegetable packing houses.
Christopher Westphal: co-founder and CEO of Sirtris Pharmaceuticals, he teamed up with David Sinclair and developed the business which was then sold to global giant GlaxoSmithKline in 2007 for a reported $1.1 billion.
Podcasts, videos and a revamped press room
The press room section on the our site has been substantially updated. Check it out here.
We have also increased our audio and video podcasts this week with the addition of various AGM exchanges since 2007. There is also a new Sky Business View package which collates the best of our discussions on the show, and also our special Babcock & Brown video package covering all our dealings with the failed company.
And speaking of interesting videos, check out this Jim Cramer interview from Comedy Central admitting mistakes were made. We once received an email from Cramer telling us to change shirts, as you can see from the entry 'Cramer warning' on our play list.
Radio this week
936 ABC Hobart - discussing the Alco-pops debacle and the new termination pay laws with Tim Cox.
702 ABC Sydney - strongly supporting the government's executive pay moves with Richard Glover.
2GB Sydney - discussing the new executive pay regulations with the anti-government Jason Morrison.
774 ABC Melbourne - discussing executive pay, Woolies and other things financial in the regular spot with Lindy Burns.
4BC Brisbane - discussing bank rip-offs with Mike Smith, including NAB's $87.50 fee for a $5000 cash advance on the credit card.
774 ABC Melbourne - from Sydney with Lindy Burns discussing ANZ shifting more jobs to India and the death of Babcock & Brown.
All up, It's been a big week folks, but 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.
Apologies it has taken until the early hours of Sunday morning to get this week's edition out, but we've been flat out with council, speaking and media commitments and thought it was best to wait for the results of the Queensland election and also report back on Friday night's big Melbourne Press Club Quill awards.
That said, there's plenty of meaty material for you to consume.
Enjoy, Stephen Mayne.
Anna Bligh's poisoned chalice as Kev borrows $1.8 billion in three days
Anna Bligh was smiling as broadly as Peter Beattie when she declared victory in the Queensland election tonight. Whilst it was a great victory, a terrific speech tonight and a great moment for Australian women - this will also be one almighty poisoned chalice.
Never before has a government been returned promising so much that simply won't be able to be delivered. The much-vaunted $107 billion infrastructure program is a complete pipe-dream. Queensland is going out the back door financially at a rate of knots and needs a Kennett-style reform program of tax rises, efficiency drives, spending cuts and privatisation.
The only thing that could possible save Bligh's jobs and infrastructure program would be a massive bailout from Canberra. The first step will be the Feds formally guaranteeing all state government bond issues.
Queensland's 32-year-old Labor Treasurer Andrew Fraser got together with the 82-year-old chairman of the Queensland Treasury Corporation, Sir Leo Heischler, and came up with a $16 billion borrowing program for 2009-10 after a record $13.8 billion was borrowed last financial year.
The only hitch is the global financial crisis and the Federal government's guarantee of private bank borrowing which has seen state government borrowing programs virtually stall over the past 6 months.
Canberra could step up and start directly borrowing for the states but there's a big question around how long the Feds can sustain its current borrowing binge.
We've put together this fascinating list tracking every Federal bond issue since Labor assumed office in November 2007 and last week we saw it escalate to record levels with the following:
Friday, March 20: $500m tender for 12 year bonds expiring in May 2021 were sold for an average yield of 4.42% and was 2.5 times over-subscribed.
Thursday, March 19: $300m tender for 90 day treasury notes expiring on June 19 were sold for an average yield of 2.66% and was 8.8 times over-subscribed.
Thursday, March 19: $300m tender for 180 day treasury notes expiring on September 18 were sold for an average yield of 2.59% and was 6.9 times over-subscribed.
Wednesday, March 18: $700m tender for 2 year bonds expiring in June 2011 were sold for an average yield of 2.95% and was 4.5 times over-subscribed.
So as Kevin Rudd and the big-spending Labor machine was inflicting significant damage on Lawrence Springborg's reputation in the last three days of the campaign and dismissing concerns about Anna Bligh's debt plans, the Federal government was simultaneously borrowing an unprecedented $1.8 billion through four separate tenders on Wednesday, Thursday and Friday.
Since the stimulus package was announced on February 3, the Rudd government has borrowed a staggering $8.4 billion - much of it timed to pour into bank accounts in the days before the Queensland election.
At least the Feds publically reveal their bond issues and outcomes, unlike the state governments which are in varying degrees of crisis but simply don't reveal even basic information on the websites of their central borrowing authorities. This is what we've been able to glean about their borrowing intentions for 2009-10 but there is no information about how far behind they've fallen:
Treasury Corporation of Victoria: hoping to borrow $4.35 billion in 2008-09
Queensland Treasury Corp: raised a staggering $13.8 billion in 2007-08, lifting the overall debt figure to $43 billion and was orginally projecting a record $16.3 billion for 2008-09, but is going to fall well short.
NSW Treasury Corporation: a 2008-09 funding requirement of $6.8 billion but all but $4.9 billion was pre-borrowed in a sensible move.
WA Treasury Corporation: latest update as of December 31 forecasts record $6.8 billion borrowing program for 2008-09.
SA Financing Authority: $8.7 billion in loans outstanding at the end of last financial year and is scheduled to borrow more than $2 billion this financial year.
At least WA is getting on with some changes to reduce the borrowing requirement, but most of the Labor states are ploughing on as if debt will freely flow forever.
Wayne Swan's executive pay plans
Last week's edition of The Mayne Report laid out the following eight areas of action required on executive pay in Australia:
* Make it compulsory for licensed fund managers to vote their shares in ASX300 companies and disclose how they vote.
* Require full disclosure of a CEO contract, rather than just a summary of the key terms.
* Any termination payment in excess of $1 million in cash, shares or benefits requires specific binding shareholder approval.
* Restore the pre-existing requirement that all equity issues to senior managers requires specific shareholder approval.
* Rather than giving CEOs an exemption from the three year director election cycle, put them up for election every year so shareholders can directly reflect on their performance and pay.
* Eliminate the outrageous and widely rorted tax concessions for senior executives who get paid with shares rather than cash.
* Require fund managers to disclose their own pay packets by closing the loophole that only sees those technically classified as "executives" revealed in the annual reports of public companies.
* Require all major super funds to disclose their fully audited accounts and pay practices, as occurs with public companies.
After 16 months of dithering, the Rudd Government finally produced some action on Wednesday with these two announcements:
Actions on golden handshakes
Allan Fels to examine executive remuneration
Our initial positive response was revealed in these four radio interviews:
936 ABC Hobart
702 ABC Sydney
2GB Sydney
774 ABC Melbourne
However, having had further time to consider the subsequent avalanche of coverage, the situation really does remain up in the air. Whilst the action on termination payouts is an important step, all we've really got on the rest is a review, albeit one with plenty of detail such as the tax rorting issue.
Allan Fels is an inspired choice, but it will still be up to the government to deliver the necessary reforms and Kevin Rudd appears to be deeply conservative when it comes to offending business. Look no further than the way he has trashed Ross Garnaut on climate change.
Even if Professor Fels and his Productivity Commission comrades come up with some great recommendations over the next 9 months, any government action won't become law until April at the earliest and we won't see it in action until the 2010 AGM commencing in October next year just as the likely election campaign kicks off.
This means it will have taken the Rudd Government's entire first term to implement any reforms on corporate governance. And even then we don't know what will be recommended.
Kohler's unfair attacks on Allan Fels
The commentariat has been all over the place in responding to the government's announcements and Alan Kohler's contributions have been particularly odd.
Business Spectator's KGB interrogation of Fels started off with Kohler asking the professor: "So, Allan, have you ever in your life received a bonus?"
It didn't get much better with these two later efforts:
Kohler: "Can I just go back to the first question I asked you at the beginning of the interview which goes to the question of what qualifies you and your colleagues to investigate this area?"
Kohler: "Allan, do you think it was reasonable of the minister yesterday to name and shame Owen Heggarty (sic) and John Alexander when their companies actually acted within the law on termination benefits as it was?"
This kind of hostile approach does neither Kohler or Professor Fels any justice. Kohler claims to have started Eureka Report to expose the racket that is Australia's investment industry.
Exactly right, Alan, the very same investment industry that has failed to control outrageous looting of shareholder wealth by the CEOs club.
Rather than railing against bureaucrats reviewing this rort and feeling sorry for poor old Owen Hegarty, who trousered an $8.4 million payout just months before Oz Minerals fell into the hands of its bankers, why not get with the program and applaud the government's belated action? Of course the panel should not include a remuneration consultant and a public company director, they have been part of the problem.
There is no better exposer of rent seeking in Australia than Allan Fels. He's exactly the right man for the job and should be supported by widely followed commentators like Kohler.
What doesn't Centro recognise about a shareholder mandate?
The Centro headhunter was in touch on Friday to say that he hasn't recommended me for an interview with the only two remaining long-term directors as they search for numerous new directors to lead Centro Retail and Centro Properties into the future after their debt rollover deal with the banks.
Whilst not definitively rejecting the candidacy, this is still a disappointing development and I explained to the headhunter that it was a major set back in terms of shareholder rights.
As Julia Gillard bangs on about Labor's mandate on unfair dismissal, Centro is clearly not recognising the mandate from last November's Centro AGM when more than 70% of the independent vote went my way (see November 29 edition from last year.)
Obviously the question of recognising a mandate from 435 million votes in favour is a matter for the board rather than the head hunter, so I'll have to take this issue up directly with Centro chairman Paul Cooper.
For some strange reason, the third most popular feature on our website this month has been this 109 second exchange at last year's Axa AGM when Paul Cooper recommended Rick Allert for another three years.
Who is listening and does it have anything to do with the Centro board renewal deliberations? Whatever the case, there will be three public opportunities to catch up with Paul Cooper at the Axa AGM on May 6 in Melbourne and then at the forthcoming Centro Retail and Centro Properties EGMs to approve the bank refinancing deal.
I was expecting to have been announced as a Centro Retail director before all these events and to have been working contructively with chairman Cooper. Alas, Friday's call suggests it ain't going to work out that way and the intended transition from a gadfly outside the tent to someone working constructively inside the tent on governance turnaround situations will have to be deferred.
Oh well, at least this means there will be no constraints at forthcoming AGMs for the likes of Macquarie Airports, Axa, Westfield, Oz Minerals, Rio Tinto and Alumina. As a Centro Retail director I was expecting to have to withdraw from the AGM space and did indeed offer to do this if the board colleagues required it.
John B Fairfax's missed opportunity
John B Fairfax was the guest speaker at Friday night's Quill Awards in Melbourne, but his contribution didn't go down particularly well with the journalists, who are generally a pretty hard lot to please.
There was a lot of talk about quality journalism but JB never really nailed his vision for it and the perception that he prefers outfits that don't heavily resource editorial. There was even a discussion about butchers and "quality meats" as he attempted to explain quality journalism.
The reference to his childhood days at Sydney's elite Cranbrook school didn't exactly project a common touch and he also rather gratuitously had a dig at the lack of quality in television caption writing on a night when both Seven and Nine did lots of pro bono video packaging for the Melbourne Press Club's big event.
That said, I was more supportive than others and still think it would be great to have a Fairfax back as chairman of Fairfax Media once the incumbent Ron Walker retires.
The highlight of his speech was JB's attack on The Australian for publishing details of his personal financial affairs on the front page last Wednesday - the same day another Australian died in Afghanistan. He also took a swipe at News Ltd's use of those fake Pauline Hanson photos.
The Herald Sun's forever polite John Trevorrow, who incorrectly introduced JB as the largest Fairfax shareholder, wisely decided not to have a crack back on resuming the microphone.
Whilst Fairfax's own coverage of the speech said JB was the second largest shareholder, he appears on some measures to have slipped to third.
JB only managed to hand over $12 million buying 16 million new shares in the 3-for-5 rights issue at 75c, which saw his stake slip from 14.6% to 10.63% or 232.5 million shares worth about $250 million.
Privately owned Maple Brown Abbott filed this notice last week revealing its stake has risen from 118.9 million shares or 7.83% to 243.8 million shares or 11.15%.
The Commonwealth Bank also filed this substantial shareholder notice last week lifting its overall stake from 207.3 million shares or 13.64% to 365.5 million shares or 16.71%. However, there appears to be some double-counting with Peter Morgan's 452 Capital which filed this notice declaring it now controls 158 million shares or 7.24%.
The irony of The Australian's revelations about the Commonwealth Bank taking out mortgages over some of JB's properties is that it was also the Commonwealth Bank which took a $20 million-plus charge over Rupert Murdoch's New York pad at the height of his debt crisis in the early 1990. This, of course, still hasn't been reported by any News Corp media outlet.
Finally, we're keen to make contact with any Fairfax Media shareholders about the opportunities which present with the retail component of the 3-for-5 entitlement offer that closes next Friday. Please email stephen@maynereport.com if you're on the register or know anyone who is.
Flights booked for Babcock & Brown creditors meeting
Whilst I was circling Sydney in a Virgin Blue flight from Melbourne at 11am on Friday, March 13, Babcock & Brown raised the white flag and aborted that afternoon's meeting of unsecured noteholders after our Kiwi brethren pulled the plug a couple of hours earlier in Auckland.
This would have been one final opportunity to give chairman Elizabeth Nosworthy a decent spray, but now she's handed over to the administrators from Deloitte.
The first creditors meeting has been called for 11am on Wednesday in Circular Quay and the flights have been booked again, so we're aiming to score a position on the creditors' committee through the status that comes with owning a solitary unsecured note.
Whilst I had some robust battles with Nosworthy at last year's Babcock AGM, the Murdoch press really took it too her last week when the Sunday Mail published this unflattering photo of her taking out the gargage.
Mike Smith, the Drive presenter on Fairfax Radio's 4BC, also let fly with this audio special about Nosworthy after another company she's a directors of, Ventracor, called in the administrators on Thursday. Surely she can't remain chairman of the Queensland Water Commission because there isn't another professional director who has notched up three administrations on major Australian public company boards.
Smith is quite a live wire and we've packaged up all our recent interviews with him here. He also produced this rather amusing number on Wayne Swan earlier in the week.
Westfield's blazes the trail for high rise apartments on Doncaster Hill
Manningham Council is going well and on Friday morning we had a developers breakfast with five councillors, five senior officers, two influential state government planning bureaucrats and most of the big landholders around the booming $1.5 billion Westfield development on Doncaster Hill.
It's amazing what a successful re-launch of Melbourne's best shopping centre can do to the spirits because the main players are increasingly confident about delivering the Doncaster Hill vision for concentrated development around our biggest activity centre.
In perhaps the most striking vote of confidence, Westfield itself has just lodged plans to develop its first ever Australian high rise apartment complex on Doncaster Hill. Whilst Westfield London has a residential component, this is unprecedented for the world's biggest shopping centre owner in its home market.
We've also got the giant Intercontinental Hotels Group committed to delivering Manningham's first five star hotel through a Crowne Plaza across the road from the council offices.
The London-listed IHG operates almost 4200 hotels after adding a staggering 430 in 2008 bringing the total rooms to 620,000 globally. It battles away with Paris-based Accor for the title of "world's biggest hotel chain" and would love to steal some business from the Accor 5 star offering in Mt Waverley.
With the council itself committed to spending $28 million delivering stage 1 of the Civic Precinct, we are talking about a lot at stake for all involved so let's hope the encouraging progress continues.
At last, the media directly links Woolies with the scourge of pokies
It has been a long and difficult campaign for us and Paul Bendat's www.pokieact.org but we've finally got a result with the media directly linking Woolworths with the scourge of pokies.
The most recent push came when Crikey led its March 9 edition with this story pointing out the remarkable dominance of Woolworths and the failure of the media to properly focus on the retailing giant's Victorian operations.
Lo and behold, The Sunday Age following up with a very strong Cameron Houston article on March 15 headlined Woolworths reaping billions from pokies in poorer suburbs.
After previously focusing the attention on minority shareholder Bruce Mathieson, even the Herald Sun's Mick Warner delivered this story
about the paper's biggest advertiser on March 18 which mentioned Woolworths in the first paragraph for a change.
But the best of the lot was the Manningham Leader last Wednesday which led page 7 with a story headlined Woolies cops blast. Yep, that blast was from your correspondent and the quotes were as follows:
Cr Stephen Mayne lashed out at Woolworths, which has a majority stake in the Doncaster venues, saying the machines were causing enormous social damage.
“Woolworths is not serving Manningham well,” Cr Mayne said.
“Our residents lose more at the pokies than they pay in rates and we have two of the top 10 venues in the state - both of which are Woolworths venues.
“Woolworths is causing enormous social damage through this dangerous product and should stop targeting vulnerable citizens with free food, special offers and extended hours just to maximise their profits.”
A bit more of this stuff and then a few institutional complaints about Woolworths potentially failing the screen test for the UN Principles for Responsible Investing and you might see some board members decide its time to sever the pokies link once and for all. That's the plan, folks, we'll just have to see how long it takes.
Profitable capital raisings on the rise
With the market enjoying something of a bear market rally, there are some good opportunities emerging from being a tiny investor in about 650 Australian listed securities. Check out the full portfolio as it stood on March 15.
Yes, yes, the paper losses are $127,457 but we always try to look on the bright side of life, so here is a list of the better plays of late which have produced almost $5000 in gross profits in March:
Wesfarmers: bought 1000 shares in the recent rights issue at $13.50 and sold them for an average $16.80 each, making about $3200.
Tabcorp: Paula and I were both on the register so we put $10,000 into the $5.80 share purchase plan and got out this week for an average $6.23 each, making about $800 for the family.
Commonwealth Office: put $5000 into the share purchase plan at 80c each and sold them for 94c this week, making a net gain of $845.
Current in-the-money capital raising
There is even more potential in the following list but you're always carrying market risk until the stock is actually sold but here is what we're backing:
Newcrest: put $5000 into an SPP at $27 and was expecting to sell on Friday but the allotment has been delayed so am hoping the stock stays above $34 into next week to crystallise a profit of about $1300.
Crown: did the $5000 BPAY on Thursday for the SPP at $4.95 and will be able to sell for a profit of about $1000 when the shares start trading on April 1 if the current price holds up.
Suncorp: was alloted $10,000 worth of shares in the recent capital raising at $4.50 and will book a profit of more than $3000 if the stock holds above $6.00 until the shares start trading next Tuesday.
Fairfax Media: the rights issue is at 75c and with the stock now at $1.05, the paper profit is at 40% on any applications for additional shares that are accepted. Offer closes next Friday but still deciding how much to throw at it.
Axa Asia Pacific: will be putting the maximum $10,000 into the $2.85 share purchase plan given that the stock has since jumped to $3.40, suggesting a profit of almost $2000.
The Mayne Report Rich List
Since we began compiling the Mayne Report Rich List documenting every Australian currently or previously worth more then $10 million, it has grown in numbers and popularity.
The Mayne Report Rich List was born on August 14, 2007 when it only had 345 names. We're now up to 1279 entries, although some are italicised, denoting that they are now longer worth more than our $10 million cut off.
Since inception, 32,986 people have visited and spent time looking at our Rich List which is usually the most popular feature on our site every day.
Here are the latest new entries:
Ben Brazil: investment banker for Macquarie who led the unsuccessful takeover in 2005 of the London Stock Exchange and recently purchased a $16.5 million mansion in Sydney's exclusive Vaucluse as Fairfax's Michael West revealed last week.
John (Strop) Cornell: famous for his role as 'Strop' on The Paul Hogan Show and also a successful hotelier. Married to Delvene Delaney, they sold the Beach Hotel in Byron Bay in 2007 for a reported $65 million, and recently purchased a townhouse in South Yarra for one of his daughters for $1.6 million.
Ross Cribb: the former NSW TAB chairman and TNT general manager sold Jay-R Thoroughbred Stud in NSW, which he established in 1970, to the Sunland Group for more than $14 million in 2004.
Millissa Fischer: president of Altona Magic Soccer Club in Victoria, her company, Kendalle Pty Ltd ran several aged-care facilities around Melbourne's suburbs. Recently she has voluntarily liquidated some homes with debts of around $9 million, but is said to be worth around $18 million.
Amanda and Dipendra Goenka: this husband and wife team are behind the teenage girl fashion stores, Forever New, which opened their 42nd store in Melbourne's Bourke St. Dipendra also runs his own clothing factories in Asia.
Michael Pikos: director of the Brisbane-based developer The Pikos Group, has developed three apartment blocks on the Gold Coast and is looking to purchase a 45-storey, 150 unit project in Broadbeach.
Patrick Quirk: backer of investment group Highland Park and former LionOre Mining founder, has emerged as a substantial shareholder of Mirabel Nickel with holdings of around 5%.
David Sinclair: pathologist and professor at Harvard Medical School, he is a co-founder of Sirtris Pharmaceuticals which was sold to global giant GlaxoSmithKline in 2007 for a reported $1.1 billion.
Andrew Taplin: managing director of Adelaide-based Taplin Group which added to their commercial property interests by purchasing the Mawson Lakes town centre for a reported $26.05 million.
Ken Warriner: co-owner of Ashburton Pastoral Company, 10% stakeholder and CEO of Consolidated Holdings Pastoral Company which has land holdings in Western Australia, Northern Territory, Queensland and New South Wales.
Leanne Wesche: founder and managing director of Fremantle-based Pacco Group. Established in 2004, it is now one of Australia's leading fruit and vegetable packing houses.
Christopher Westphal: co-founder and CEO of Sirtris Pharmaceuticals, he teamed up with David Sinclair and developed the business which was then sold to global giant GlaxoSmithKline in 2007 for a reported $1.1 billion.
Podcasts, videos and a revamped press room
The press room section on the our site has been substantially updated. Check it out here.
We have also increased our audio and video podcasts this week with the addition of various AGM exchanges since 2007. There is also a new Sky Business View package which collates the best of our discussions on the show, and also our special Babcock & Brown video package covering all our dealings with the failed company.
And speaking of interesting videos, check out this Jim Cramer interview from Comedy Central admitting mistakes were made. We once received an email from Cramer telling us to change shirts, as you can see from the entry 'Cramer warning' on our play list.
Radio this week
936 ABC Hobart - discussing the Alco-pops debacle and the new termination pay laws with Tim Cox.
702 ABC Sydney - strongly supporting the government's executive pay moves with Richard Glover.
2GB Sydney - discussing the new executive pay regulations with the anti-government Jason Morrison.
774 ABC Melbourne - discussing executive pay, Woolies and other things financial in the regular spot with Lindy Burns.
4BC Brisbane - discussing bank rip-offs with Mike Smith, including NAB's $87.50 fee for a $5000 cash advance on the credit card.
774 ABC Melbourne - from Sydney with Lindy Burns discussing ANZ shifting more jobs to India and the death of Babcock & Brown.
All up, It's been a big week folks, but 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.