Brisconnections, Fairfax windfall, Oz Minerals tilt, City Pacific, Defence, Westfield, The Prince, Rich List and much more
April 6, 2009
Dear Mayne Reporters,
First up this week, check out the interview on Friday morning with Virginia Trioli and Joe O'Brien from ABC2 Breakfast about the Brisconnections fiasco, and have a listen to this afternoon's interview with 4BC Brisbane's Drive presenter Mike Smith. I would have been flying to Brisbane for both of the Brisconnections EGMs on April 14 but it clashes with the first Manningham City Council audit committee meeting of the year so we're instead in the market for a proxy to attend if you know anyone.
There have been several interesting developments in the Brisconnections story today, including the shares going into a trading halt because one of the underwriters is preparing a proposal for unitholders. This is most likely to be Macquarie Group biting the bullet and moving to lance the boil with an offer that will remove the spectre of hundreds of punters being bankrupted and losing their homes to a bunch of nasty millionaire bankers based in Sydney's Martin Place.
Corporate Law minister Nick Sherry has also stepped in proposing a change to the ASX listing rules that would warn investors about partly paid instruments, requiring them to sign an authorisation when doing it for the first time.
However, this is very much after the stable door has slammed shut and the Sherry press release doesn't even name Brisconnections.
I was thinking about this as a Commonwealth Bank customer withdrawing $800 in cash from a NAB AGM this afternoon. Up popped the prompt asking whether I'd cop the $1.50 foreign ATM fee.
The majority of the mum and dad Brisconnections victims have bought their exposure through Comsec and received absolutely no warning when they bought the stock for 0.1c about taking on a $2 liability for each unit.
ComSec are happy to hit you with emails, SMS messages and flashing red notices when you get close to a margin call, but they just sat back and let hundreds of their clients risk losing their homes over the past few months ever since BrisConnections first hit 0.1c in late October. It's been six months, for goodness sake, and all the while Brisconnections has been chaired by ASX director Trevor Rowe. Surely he's got to go, along with fellow ASX director Michael Sharpe who was chairman of the Babcock & Brown audit committee for most of its life as a listed company.
The ASX has also stepped in today and released this very detailed circular clarifying how Brisconnections trading will be handled as the second $1 instalment falls due.
The $1 paid shares trade under the code bcsca and will trade for the last time on April 15, the day after the two wind-up EGMs in Brisbane. I reckon Macquarie has done or will do deal with Deutsche Bank to share the losses and will move to soak up shares in addition to the 8% or 31.5 million units it acquired on March 30. Tomorrow will be the last opportunity for them to buy and settle in time for the EGMs, so it could be a very interesting day.
If the bcsca units can't trade after April 15, unitholders will have a big incentive to get out before then given that the second $1 call is due on April 29.
Units paid to $2 will trade under the code bcscb, but they won't start trading until May 7. There is a small additional incentive to pay up because those who do will be entitled to receive the 0.5c distribution which has a record date of May 14 and will be paid in either shares or cash on June 12.
For an investment bank embroiled in a supposedly enormous damaging PR debacle, Macquarie Group shares sure are rocketing ahead. The stock gained another $1.55 to a four-month high of $31 this afternoon and has now doubled since the lows of almost $15 in early March.
I'm an unhappy owner of 1115 Brisconnections units bought for 39c each and will be shelling out another $1115 later this month to acquire something that will probably again trade below 30c, possible even down near zero if the smell is bad enough.
Fairfax scale back but handy profit remains
Fairfax Media announced the allotment policy for the retail component of their capital raising on Friday and from a personal financial point of view it was touch disappointing they did a Wesfarmers on the scale back rather than follow the earlier precedent set by Suncorp and Macquarie Office to accept all retail applications for new shares.
That said, we're still looking at a much-needed profit of about $25,000 (the portfolio is under water by more than $100,000) which is not to be sneezed at and will fund all travel commitments during the upcoming AGM mini-season.
However, assuming the Fairfax share price holds up at about $1.13 by the time we sell tomorrow, the profit without a scale back would have been closer to $50,000, so we've fired off a letter to The AFR pointing out how retail shareholders have been diluted as a class and hopefully this will get a run in tomorrow's paper.
Fairfax shares soared 7.5c to $1.135 today on the back of an item in The AFR's Street Talk column quoting a Citi analyst speculating that Kerry Stokes could launch a bid at $1.50-a-share through Seven without having to borrow.
This seems very strange maths considering that Fairfax still has $2 billion in debt and with the expanded capital base of 2.352 million shares on issue, a $1.50 bid would cost $3.527 billion in cash, before adding the debt to reach an enterprise value of $5.53 billion.
Seven has about $1 billion of cash and its joint venture with KKR owning the television and magazine assets is loaded to the eye-balls in debt, so much so that Stokes has written off the residual equity to zero and presumably wants to keep some spare cash to buy back the business from the receiver if the partners can't agree on a mutual recapitalisation proposal.
Big executive pay hit for Fairfax websites
Despite some differences of opinion with the Fairfax Media corporate office over the capital raising allocation policy, the columns are continuing for www.businessday.com.au and this week's effort is one of the more comprehensive wraps of the executive pay debate that you will see. I was intending to foreshadow what should be a fascinating debate on the SBS program Insight tomorrow night, but the sub-editors stripped that element out, which didn't make the SBS producers particularly happy.
They've certainly put together a well-credentialled panel to debate executive pay so tune in from 7.30pm tomorrow night on SBS.
Time for all business media to produce fair coverage on rivals
The Weekend AFR's widely read Prince column, which is presumably still edited by Neil Chenoweth, came up with an extravagant conspiracy theory on Saturday.
It all comes back to investment banker John Wylie and spin doctor John Connolly, whose two bigger clients over the years have been News Corp and BHP.
Because Connolly has a motoring column in The Weekend Australian and recently took on a “corporate relations” advisory role with The Australian to open doors at the big end of town, The Prince observed the following:
The Prince, of course, has scoffed at Rio Tinto's and Chinalco's suspicions that The Australian (recently dubbed The White Australian in Beijing and Shanghai circles) is running a campaign against the Chinese mining house.
BHP has a proud tradition of navigating the fourth estate to get its message out. Take last year, when online Business Spectator's Robert Gottliebsen did a video interview for the site – which was also sent to BHP Billiton's 525,000 shareholders – discussing BHP's bid for Rio in a fireside “interview” with Argus and CEO Marius Kloppers.
The risk in any such move is that it may send a message that Business Spectator is uncomfortably close to those it is reporting on, and in hindsight the site may have decided to act differently.
Not that Business Spectator key shareholder John Wylie, from investment bankers Carnegie Wylie, would mind any blurrings of the brand's image. Wylie, who rose to prominence last year when he decided bagging Commonwealth Bank's Ralph Norris was a good idea, just happens to be from one of the firms advising BHP Billiton on the Rio bid.
If you join all the dots The AFR is basically saying that Business Spectator and The Australian are being manipulated by John Wylie and John Connolly who are being paid to further the interests of BHP which still wants to consume the prize assets of Rio Tinto whilst keeping the Chinese outside the tent.
Whilst Gottie certainly shouldn't have done that puff piece BHP interview, it's still a cheap shot by The AFR and one that both Crikey and Business Specatator have not responded to. I submitted a Crikey story for today's edition on the broader issue of how business outlets cover each other, but it didn't get a run.
Aunty's blunder over Macqurarie Bank pay protest
The Fairfax sub-editors took this bit out of today's column on executive pay, but it is still definitely worth a mention:
ABC Television's London correspondent Emma Alberici told almost 1 million Australians this on Friday night whilst showing vision of Barack Obama and former Macquarie Bank CEO Allan Moss:
“The American President thinks a shareholder vote will help bring down executive salaries but when Macquarie Bank faced a vote against its boss's pay in 2007, its board of directors did nothing about it.”
That line on the 7pm ABC news couldn't be more wrong. Macquarie actually changed its pay policies in response to the 21.44% against vote in 2007?
ComBank gouging fees out of City Pacific
It's good to see Trilogy Capital Group and mortgage fund Balmain teaming up to attempt a palace coup at City Pacific's frozen First Mortgage Fund.
The fund was put together primarily though advertising in Queensland and NSW newspapers and City Pacific has been gouging management fees of more than 3% a year, even though it has been frozen for more than a year, as this Gold Coast Bulletin article explains.
The new manager is proposing to charge 1.5%, which is the same rate proposed by a group of investors who have called an EGM for the Gold Coast on May 1.
However, in what wasn't an April Fool's Joke, City Pacific came out last Wednesday proposing to voluntarily cut the management fee to 2.5%.
We only belatedly got the City Pacific half year results on March 27 and it came in at a loss of $73.4 million, meaning the outfit actually has negative net assets. How on earth does ASIC let such an insolvent vehicle hang onto its Australian Financial Services Licence?
The stock is down to less than 1c and its biggest earner is the gouge on this fund.
The Commonwealth Bank is up to its eye-balls in this adventure with exposures of about $100 million to both the First Mortgage Fund and City Pacific itself.
Something seriously went wrong in Queensland for ComBank when you consider the Storm Financial fiasco in Townsville and the $500 million-plus that it has dropped backing Eddie Groves and ABC Learning.
One strange element in the City Pacific proxy fight is that Trilogy and Balmain require support from more than 50% of units. This is a really tough ask because a typical turnout is normally only about 60% and I've never heard of such a requirement in any public company vote before.
I guess these unlisted mortgage funds are different but that makes for quite a poison pill and any such vote to remove the manager should only require support from 50% of those who vote, not 50% of all units on issue.
This makes apathy the biggest enemy of the reform team.
Was News Ltd's Rudd Rage leak a case of revenge for Nick Warner?
Gvernments have long learnt about the difficulties of taking on Defence Departments and we're seeing it again with the battle between Defence Minister Joel Fitzgibbon and Defence secretary Nick Warner at the moment.
The whole Helen Lui affair was kicked off by The Age's dynamic investigative duo Nick McKenzie and Richard Baker, who only just came up for air after collecting the Gold Quill award from the Melbourne Press Club when they landed what will be a good chance for the Gold Walkley when the industry heavies gather in Sydney on November 26.
The government's response was to background the media for front page stories last Monday suggesting that Warner would not have his contract renewed later this year.
Lo and behold, Kevin Rudd copped the most embarrassing leak of his prime ministership whilst at the G20 in London when details of his foul-mouthed spray at an RAAF hostie were splashed on the front pages of the Murdoch tabloids.
What hasn't been pointed out anywhere yet is that Nick Warner's son, Michael Warner, is one of the Herald Sun's prime hatchets and stitch-ups men. He's a good hand, too.
Of course, the two Warners both probably had nothing to do with the leak and the by line was with Steve Lewis and Ian McPhedran who are both Canberra-based correspondents for News Ltd. Indeed, McPhedran is one of the best-connected defence reporters in the land.
However, the sub-text of all this is very clear: "You want to give Nick Warner the flick: Oh year, try this for size".
Rather than attempting to save Fitzgibbon, who is clearly untenable as Defence Minister, Kevin Rudd should promptly install Greg Combet in the job given the excellent progress he has made on procurement and the good relationship he has struck up with key players in defence.
Combet may be in the left faction and carry baggage from his ACTU days, but he's an undoubted intellectual talent who is privately telling people it's a relief to be out of the ACTU and he's enjoying the challenges of government.
Contact with Oz Minerals chairman Barry Cusack
The call came through from Oz Minerals on Friday that chairman Barry Cusack would like to engage. It's amazing how lobbing a board nomination can change communications.
It will probably be a private conversation but I'm expecting one issue will be the content of the platform to be distributed to shareholders given the latest MinMetals deal from last week.
The current platform reads as follows:
Mr Mayne is standing for the Oz Minerals board as a catalyst for change. There needs to be more boardroom accountability for the company's precarious financial position and the decision last year to ignore an overwhelming shareholder vote and award an $8.3 million separation payment to former Oxiana Resources managing director Owen Hegarty.
Given that the MinMetals deal will likely lead to a dramatically smaller company left with Prominent Hill, Martabe and about $450 million of net cash, perhaps a revised platform with the following would be more suitable:
Mr Mayne is standing for the Oz Minerals board as a catalyst for change. There needs to be more boardroom accountability for the destruction of shareholder value and the decision last year to ignore an overwhelming shareholder vote and award an $8.3 million separation payment to former Oxiana Resources managing director Owen Hegarty.
That said, the Oz Minerals debacle of the past six months really is an indictment of the Australian banking cartel. Here was a company which was clearly solvent all the way through, yet the banks were poised with the axe since this shock announcement about refinancing battles on November 25.
We're told that it was two recalcitrant French banks which caused all the grief. In that case, the Big Four Australian banks should have just stepped up and taken them out to stabilise our third biggest mining company.
Instead, the majority of the Oz Minerals assets will disappear into the belly of the Chinese Government and Australia's woeful record on foreign ownership of our resources dowry will just get a whole lot worse.
ANZ is particularly guilty given it ran that huge advertising campaign a few years ago trumpeting how it supported emerging corporate clients such as Oxiana Resources. When it came to the crunch, ANZ wasn't able to round up enough financial support to prevent a Chinese fire-sale.
Rudd's debt binge continues unabated
The Rudd Government has now raised a staggering $11.6 billion through the bond market since the reckless $42 billion stimulus package was announced on February 3.
Indeed, there has been $1.8 billion raised since last Wednesday as follows:
April 3, 2009: $599m tender for 4 year bonds expiring in May 2015 were sold for an average yield of 3.84% and was 3.4 times over-subscribed.
April 2, 2009: $300m tender for 90 day treasury notes expiring on July 3 were sold for an average yield of 2.78% and was 5.1 times over-subscribed.
April 2, 2009: $300m tender for 180 day treasury notes expiring on October 2 were sold for an average yield of 2.7% and was 4.6 times over-subscribed.
April 1, 2009: $600m tender for 8 year bonds expiring in February 2017 were sold for an average yield of 4.28% and was 3.7 times over-subscribed.
Go here to see the full list of Federal debt raisings since Kevin Rudd was elected Prime Minister in November 2007.
Up and coming AGMs
AGM attendances in 2009 will be lower than the record 65 in 2008, but here is a list of meetings coming up that we might be interested in.
QBE Insurance is putting on the season opener this Wednesday and it should be a beauty given the backdown by chairman John Cloney over the remuneration report. We'll be there and will report back to subscribers.
Recent radio spots
Have a listen to various interviews on radio and why not sign up for our video and audio podcasts to hear and see much more. Also, check out these special packages for our other regular media spots. The latest radio spots have been as follows:
774 ABC Melbourne: discussing Chinese and foreign ownership of Australia's infrastructure.
4BC Brisbane: discussing the Brisconnections fiasco
Cornwall cartoons for The Mayne Report
We're delighted to welcome seasoned cartoonist Mark Cornwall to The Mayne Report. Mark drew many hundreds of excellent toons for Crikey over the years before returning to teaching, but he's keen to get back into the game and we're delighted to have him. It will be interesting to see if a few sacked employees start turning up to AGMs over the coming weeks, as this toon suggests:
Westfield apartment tower makes The AFR
The relationship with Westfield founder Frank Lowy has been up and down over the past 11 years ever since he launched a major attack at the 1998 Westfield Holdings AGM.
So it is quite an interesting experience sitting on Manningham City Council where the biggest rate payer is none other than the redeveloped Westfield Doncaster, which has taken the Melbourne retail market by storm since it was re-opened by Megan Gale, John Brumby and then mayor Geoff Gough six months ago.
Westfield is so bullish about Doncaster that it has submitted a $40 million apartment development on an adjacent site. These things sometimes take a while to seep out.
After the plans were made public, The Mayne Report first mentioned the story in the March 22 edition and it was then the front page splash in The Manningham Leader on March 25.
We gave it another rev when chatting to 774 ABC Drive presenter Lindy Burns on April 1 and that triggered a call from The AFR's Melbourne-based property writer Nick Lenaghan, who turned it into a page 17 lead with a page one pointer on Saturday.
Check out the full article. My quotes were as follows: "For Westfield to come along and propose their first apartment development in Australia is a huge vote of confidence of Doncaster. It might just be a case of pushing through planning approvals during the down times. A lot of developers stockpile their development approvals for when the councils and authorities are more keen to generate activity."
I've just got off the phone from a resident in Berkely Street and would like to send a message to the Westfield executives who get these missives that the promise to chain off the nearby car park at night hasn't yet been fulfilled and there were hoons tearing around the gravel at 1am this morning.
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 1332 entries, although some are italicised, denoting that they are now longer worth more than our $10 million cut off. Here are a few more entries:
Tony Hakim: controlling shareholder of mobile phone and car radio retailer, Strathfield Group. He is the founder of the Clear Communications Group which he has sold into Strathfield in December 2008 for a reported $115 million in shares.
Mark Stevens: non-executive director of Jeanswest was going to move to a newly built mansion in the affluent Melbourne suburb of Toorak. He decided against relocating his family from their Park Orchards property, and is now selling the Toorak property for more than $6 million.
Young family: their heritage listed family home in the Blue Mountains is leaving the family. Built in the late 1800s, and after 50 years' use as a holiday home, "generational priorities" have influenced the sale for more than $4 million.
Carole Bailey: her European-style 650 square metre home, on Sydney's North Shore is on the market. Having occupied the property for the past 25 years, she is selling the property for more than $10 million.
Rob Rankin: the Australian expat made a fortune as the Hong Kong-based Asian head of investment banking for UBS since 2003 and is now tipped to take a similar position at Deutsche Bank.
Share trades and capital raising profits
With the margin loan still in place and paper losses exceeding $100,000, we have continued to lighten up the portfolio with more sales in the past month. Check out all the trades so far this year and here's the most recent disposals:
April 1
Westpac: sold 18 at $19.31
Primeag Australia: sold 220 at $1.08
Allco Equity Partners: sold 130 at $1.93
However, we're certainly having a better run with capital raising and share purchase plans, so much so that I'm contemplating lifting the portfolio back above 700 stocks again, especially if the much-needed $25,000 Fairfax profit is delivered tomorrow. Fingers crossed and we'll let you know in the next edition.
That's all for now.
Do ya best, Stephen Mayne
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First up this week, check out the interview on Friday morning with Virginia Trioli and Joe O'Brien from ABC2 Breakfast about the Brisconnections fiasco, and have a listen to this afternoon's interview with 4BC Brisbane's Drive presenter Mike Smith. I would have been flying to Brisbane for both of the Brisconnections EGMs on April 14 but it clashes with the first Manningham City Council audit committee meeting of the year so we're instead in the market for a proxy to attend if you know anyone.
There have been several interesting developments in the Brisconnections story today, including the shares going into a trading halt because one of the underwriters is preparing a proposal for unitholders. This is most likely to be Macquarie Group biting the bullet and moving to lance the boil with an offer that will remove the spectre of hundreds of punters being bankrupted and losing their homes to a bunch of nasty millionaire bankers based in Sydney's Martin Place.
Corporate Law minister Nick Sherry has also stepped in proposing a change to the ASX listing rules that would warn investors about partly paid instruments, requiring them to sign an authorisation when doing it for the first time.
However, this is very much after the stable door has slammed shut and the Sherry press release doesn't even name Brisconnections.
I was thinking about this as a Commonwealth Bank customer withdrawing $800 in cash from a NAB AGM this afternoon. Up popped the prompt asking whether I'd cop the $1.50 foreign ATM fee.
The majority of the mum and dad Brisconnections victims have bought their exposure through Comsec and received absolutely no warning when they bought the stock for 0.1c about taking on a $2 liability for each unit.
ComSec are happy to hit you with emails, SMS messages and flashing red notices when you get close to a margin call, but they just sat back and let hundreds of their clients risk losing their homes over the past few months ever since BrisConnections first hit 0.1c in late October. It's been six months, for goodness sake, and all the while Brisconnections has been chaired by ASX director Trevor Rowe. Surely he's got to go, along with fellow ASX director Michael Sharpe who was chairman of the Babcock & Brown audit committee for most of its life as a listed company.
The ASX has also stepped in today and released this very detailed circular clarifying how Brisconnections trading will be handled as the second $1 instalment falls due.
The $1 paid shares trade under the code bcsca and will trade for the last time on April 15, the day after the two wind-up EGMs in Brisbane. I reckon Macquarie has done or will do deal with Deutsche Bank to share the losses and will move to soak up shares in addition to the 8% or 31.5 million units it acquired on March 30. Tomorrow will be the last opportunity for them to buy and settle in time for the EGMs, so it could be a very interesting day.
If the bcsca units can't trade after April 15, unitholders will have a big incentive to get out before then given that the second $1 call is due on April 29.
Units paid to $2 will trade under the code bcscb, but they won't start trading until May 7. There is a small additional incentive to pay up because those who do will be entitled to receive the 0.5c distribution which has a record date of May 14 and will be paid in either shares or cash on June 12.
For an investment bank embroiled in a supposedly enormous damaging PR debacle, Macquarie Group shares sure are rocketing ahead. The stock gained another $1.55 to a four-month high of $31 this afternoon and has now doubled since the lows of almost $15 in early March.
I'm an unhappy owner of 1115 Brisconnections units bought for 39c each and will be shelling out another $1115 later this month to acquire something that will probably again trade below 30c, possible even down near zero if the smell is bad enough.
Fairfax scale back but handy profit remains
Fairfax Media announced the allotment policy for the retail component of their capital raising on Friday and from a personal financial point of view it was touch disappointing they did a Wesfarmers on the scale back rather than follow the earlier precedent set by Suncorp and Macquarie Office to accept all retail applications for new shares.
That said, we're still looking at a much-needed profit of about $25,000 (the portfolio is under water by more than $100,000) which is not to be sneezed at and will fund all travel commitments during the upcoming AGM mini-season.
However, assuming the Fairfax share price holds up at about $1.13 by the time we sell tomorrow, the profit without a scale back would have been closer to $50,000, so we've fired off a letter to The AFR pointing out how retail shareholders have been diluted as a class and hopefully this will get a run in tomorrow's paper.
Fairfax shares soared 7.5c to $1.135 today on the back of an item in The AFR's Street Talk column quoting a Citi analyst speculating that Kerry Stokes could launch a bid at $1.50-a-share through Seven without having to borrow.
This seems very strange maths considering that Fairfax still has $2 billion in debt and with the expanded capital base of 2.352 million shares on issue, a $1.50 bid would cost $3.527 billion in cash, before adding the debt to reach an enterprise value of $5.53 billion.
Seven has about $1 billion of cash and its joint venture with KKR owning the television and magazine assets is loaded to the eye-balls in debt, so much so that Stokes has written off the residual equity to zero and presumably wants to keep some spare cash to buy back the business from the receiver if the partners can't agree on a mutual recapitalisation proposal.
Big executive pay hit for Fairfax websites
Despite some differences of opinion with the Fairfax Media corporate office over the capital raising allocation policy, the columns are continuing for www.businessday.com.au and this week's effort is one of the more comprehensive wraps of the executive pay debate that you will see. I was intending to foreshadow what should be a fascinating debate on the SBS program Insight tomorrow night, but the sub-editors stripped that element out, which didn't make the SBS producers particularly happy.
They've certainly put together a well-credentialled panel to debate executive pay so tune in from 7.30pm tomorrow night on SBS.
Time for all business media to produce fair coverage on rivals
The Weekend AFR's widely read Prince column, which is presumably still edited by Neil Chenoweth, came up with an extravagant conspiracy theory on Saturday.
It all comes back to investment banker John Wylie and spin doctor John Connolly, whose two bigger clients over the years have been News Corp and BHP.
Because Connolly has a motoring column in The Weekend Australian and recently took on a “corporate relations” advisory role with The Australian to open doors at the big end of town, The Prince observed the following:
The Prince, of course, has scoffed at Rio Tinto's and Chinalco's suspicions that The Australian (recently dubbed The White Australian in Beijing and Shanghai circles) is running a campaign against the Chinese mining house.
BHP has a proud tradition of navigating the fourth estate to get its message out. Take last year, when online Business Spectator's Robert Gottliebsen did a video interview for the site – which was also sent to BHP Billiton's 525,000 shareholders – discussing BHP's bid for Rio in a fireside “interview” with Argus and CEO Marius Kloppers.
The risk in any such move is that it may send a message that Business Spectator is uncomfortably close to those it is reporting on, and in hindsight the site may have decided to act differently.
Not that Business Spectator key shareholder John Wylie, from investment bankers Carnegie Wylie, would mind any blurrings of the brand's image. Wylie, who rose to prominence last year when he decided bagging Commonwealth Bank's Ralph Norris was a good idea, just happens to be from one of the firms advising BHP Billiton on the Rio bid.
If you join all the dots The AFR is basically saying that Business Spectator and The Australian are being manipulated by John Wylie and John Connolly who are being paid to further the interests of BHP which still wants to consume the prize assets of Rio Tinto whilst keeping the Chinese outside the tent.
Whilst Gottie certainly shouldn't have done that puff piece BHP interview, it's still a cheap shot by The AFR and one that both Crikey and Business Specatator have not responded to. I submitted a Crikey story for today's edition on the broader issue of how business outlets cover each other, but it didn't get a run.
Aunty's blunder over Macqurarie Bank pay protest
The Fairfax sub-editors took this bit out of today's column on executive pay, but it is still definitely worth a mention:
ABC Television's London correspondent Emma Alberici told almost 1 million Australians this on Friday night whilst showing vision of Barack Obama and former Macquarie Bank CEO Allan Moss:
“The American President thinks a shareholder vote will help bring down executive salaries but when Macquarie Bank faced a vote against its boss's pay in 2007, its board of directors did nothing about it.”
That line on the 7pm ABC news couldn't be more wrong. Macquarie actually changed its pay policies in response to the 21.44% against vote in 2007?
ComBank gouging fees out of City Pacific
It's good to see Trilogy Capital Group and mortgage fund Balmain teaming up to attempt a palace coup at City Pacific's frozen First Mortgage Fund.
The fund was put together primarily though advertising in Queensland and NSW newspapers and City Pacific has been gouging management fees of more than 3% a year, even though it has been frozen for more than a year, as this Gold Coast Bulletin article explains.
The new manager is proposing to charge 1.5%, which is the same rate proposed by a group of investors who have called an EGM for the Gold Coast on May 1.
However, in what wasn't an April Fool's Joke, City Pacific came out last Wednesday proposing to voluntarily cut the management fee to 2.5%.
We only belatedly got the City Pacific half year results on March 27 and it came in at a loss of $73.4 million, meaning the outfit actually has negative net assets. How on earth does ASIC let such an insolvent vehicle hang onto its Australian Financial Services Licence?
The stock is down to less than 1c and its biggest earner is the gouge on this fund.
The Commonwealth Bank is up to its eye-balls in this adventure with exposures of about $100 million to both the First Mortgage Fund and City Pacific itself.
Something seriously went wrong in Queensland for ComBank when you consider the Storm Financial fiasco in Townsville and the $500 million-plus that it has dropped backing Eddie Groves and ABC Learning.
One strange element in the City Pacific proxy fight is that Trilogy and Balmain require support from more than 50% of units. This is a really tough ask because a typical turnout is normally only about 60% and I've never heard of such a requirement in any public company vote before.
I guess these unlisted mortgage funds are different but that makes for quite a poison pill and any such vote to remove the manager should only require support from 50% of those who vote, not 50% of all units on issue.
This makes apathy the biggest enemy of the reform team.
Was News Ltd's Rudd Rage leak a case of revenge for Nick Warner?
Gvernments have long learnt about the difficulties of taking on Defence Departments and we're seeing it again with the battle between Defence Minister Joel Fitzgibbon and Defence secretary Nick Warner at the moment.
The whole Helen Lui affair was kicked off by The Age's dynamic investigative duo Nick McKenzie and Richard Baker, who only just came up for air after collecting the Gold Quill award from the Melbourne Press Club when they landed what will be a good chance for the Gold Walkley when the industry heavies gather in Sydney on November 26.
The government's response was to background the media for front page stories last Monday suggesting that Warner would not have his contract renewed later this year.
Lo and behold, Kevin Rudd copped the most embarrassing leak of his prime ministership whilst at the G20 in London when details of his foul-mouthed spray at an RAAF hostie were splashed on the front pages of the Murdoch tabloids.
What hasn't been pointed out anywhere yet is that Nick Warner's son, Michael Warner, is one of the Herald Sun's prime hatchets and stitch-ups men. He's a good hand, too.
Of course, the two Warners both probably had nothing to do with the leak and the by line was with Steve Lewis and Ian McPhedran who are both Canberra-based correspondents for News Ltd. Indeed, McPhedran is one of the best-connected defence reporters in the land.
However, the sub-text of all this is very clear: "You want to give Nick Warner the flick: Oh year, try this for size".
Rather than attempting to save Fitzgibbon, who is clearly untenable as Defence Minister, Kevin Rudd should promptly install Greg Combet in the job given the excellent progress he has made on procurement and the good relationship he has struck up with key players in defence.
Combet may be in the left faction and carry baggage from his ACTU days, but he's an undoubted intellectual talent who is privately telling people it's a relief to be out of the ACTU and he's enjoying the challenges of government.
Contact with Oz Minerals chairman Barry Cusack
The call came through from Oz Minerals on Friday that chairman Barry Cusack would like to engage. It's amazing how lobbing a board nomination can change communications.
It will probably be a private conversation but I'm expecting one issue will be the content of the platform to be distributed to shareholders given the latest MinMetals deal from last week.
The current platform reads as follows:
Mr Mayne is standing for the Oz Minerals board as a catalyst for change. There needs to be more boardroom accountability for the company's precarious financial position and the decision last year to ignore an overwhelming shareholder vote and award an $8.3 million separation payment to former Oxiana Resources managing director Owen Hegarty.
Given that the MinMetals deal will likely lead to a dramatically smaller company left with Prominent Hill, Martabe and about $450 million of net cash, perhaps a revised platform with the following would be more suitable:
Mr Mayne is standing for the Oz Minerals board as a catalyst for change. There needs to be more boardroom accountability for the destruction of shareholder value and the decision last year to ignore an overwhelming shareholder vote and award an $8.3 million separation payment to former Oxiana Resources managing director Owen Hegarty.
That said, the Oz Minerals debacle of the past six months really is an indictment of the Australian banking cartel. Here was a company which was clearly solvent all the way through, yet the banks were poised with the axe since this shock announcement about refinancing battles on November 25.
We're told that it was two recalcitrant French banks which caused all the grief. In that case, the Big Four Australian banks should have just stepped up and taken them out to stabilise our third biggest mining company.
Instead, the majority of the Oz Minerals assets will disappear into the belly of the Chinese Government and Australia's woeful record on foreign ownership of our resources dowry will just get a whole lot worse.
ANZ is particularly guilty given it ran that huge advertising campaign a few years ago trumpeting how it supported emerging corporate clients such as Oxiana Resources. When it came to the crunch, ANZ wasn't able to round up enough financial support to prevent a Chinese fire-sale.
Rudd's debt binge continues unabated
The Rudd Government has now raised a staggering $11.6 billion through the bond market since the reckless $42 billion stimulus package was announced on February 3.
Indeed, there has been $1.8 billion raised since last Wednesday as follows:
April 3, 2009: $599m tender for 4 year bonds expiring in May 2015 were sold for an average yield of 3.84% and was 3.4 times over-subscribed.
April 2, 2009: $300m tender for 90 day treasury notes expiring on July 3 were sold for an average yield of 2.78% and was 5.1 times over-subscribed.
April 2, 2009: $300m tender for 180 day treasury notes expiring on October 2 were sold for an average yield of 2.7% and was 4.6 times over-subscribed.
April 1, 2009: $600m tender for 8 year bonds expiring in February 2017 were sold for an average yield of 4.28% and was 3.7 times over-subscribed.
Go here to see the full list of Federal debt raisings since Kevin Rudd was elected Prime Minister in November 2007.
Up and coming AGMs
AGM attendances in 2009 will be lower than the record 65 in 2008, but here is a list of meetings coming up that we might be interested in.
QBE Insurance is putting on the season opener this Wednesday and it should be a beauty given the backdown by chairman John Cloney over the remuneration report. We'll be there and will report back to subscribers.
Recent radio spots
Have a listen to various interviews on radio and why not sign up for our video and audio podcasts to hear and see much more. Also, check out these special packages for our other regular media spots. The latest radio spots have been as follows:
774 ABC Melbourne: discussing Chinese and foreign ownership of Australia's infrastructure.
4BC Brisbane: discussing the Brisconnections fiasco
Cornwall cartoons for The Mayne Report
We're delighted to welcome seasoned cartoonist Mark Cornwall to The Mayne Report. Mark drew many hundreds of excellent toons for Crikey over the years before returning to teaching, but he's keen to get back into the game and we're delighted to have him. It will be interesting to see if a few sacked employees start turning up to AGMs over the coming weeks, as this toon suggests:
Westfield apartment tower makes The AFR
The relationship with Westfield founder Frank Lowy has been up and down over the past 11 years ever since he launched a major attack at the 1998 Westfield Holdings AGM.
So it is quite an interesting experience sitting on Manningham City Council where the biggest rate payer is none other than the redeveloped Westfield Doncaster, which has taken the Melbourne retail market by storm since it was re-opened by Megan Gale, John Brumby and then mayor Geoff Gough six months ago.
Westfield is so bullish about Doncaster that it has submitted a $40 million apartment development on an adjacent site. These things sometimes take a while to seep out.
After the plans were made public, The Mayne Report first mentioned the story in the March 22 edition and it was then the front page splash in The Manningham Leader on March 25.
We gave it another rev when chatting to 774 ABC Drive presenter Lindy Burns on April 1 and that triggered a call from The AFR's Melbourne-based property writer Nick Lenaghan, who turned it into a page 17 lead with a page one pointer on Saturday.
Check out the full article. My quotes were as follows: "For Westfield to come along and propose their first apartment development in Australia is a huge vote of confidence of Doncaster. It might just be a case of pushing through planning approvals during the down times. A lot of developers stockpile their development approvals for when the councils and authorities are more keen to generate activity."
I've just got off the phone from a resident in Berkely Street and would like to send a message to the Westfield executives who get these missives that the promise to chain off the nearby car park at night hasn't yet been fulfilled and there were hoons tearing around the gravel at 1am this morning.
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 1332 entries, although some are italicised, denoting that they are now longer worth more than our $10 million cut off. Here are a few more entries:
Tony Hakim: controlling shareholder of mobile phone and car radio retailer, Strathfield Group. He is the founder of the Clear Communications Group which he has sold into Strathfield in December 2008 for a reported $115 million in shares.
Mark Stevens: non-executive director of Jeanswest was going to move to a newly built mansion in the affluent Melbourne suburb of Toorak. He decided against relocating his family from their Park Orchards property, and is now selling the Toorak property for more than $6 million.
Young family: their heritage listed family home in the Blue Mountains is leaving the family. Built in the late 1800s, and after 50 years' use as a holiday home, "generational priorities" have influenced the sale for more than $4 million.
Carole Bailey: her European-style 650 square metre home, on Sydney's North Shore is on the market. Having occupied the property for the past 25 years, she is selling the property for more than $10 million.
Rob Rankin: the Australian expat made a fortune as the Hong Kong-based Asian head of investment banking for UBS since 2003 and is now tipped to take a similar position at Deutsche Bank.
Share trades and capital raising profits
With the margin loan still in place and paper losses exceeding $100,000, we have continued to lighten up the portfolio with more sales in the past month. Check out all the trades so far this year and here's the most recent disposals:
April 1
Westpac: sold 18 at $19.31
Primeag Australia: sold 220 at $1.08
Allco Equity Partners: sold 130 at $1.93
However, we're certainly having a better run with capital raising and share purchase plans, so much so that I'm contemplating lifting the portfolio back above 700 stocks again, especially if the much-needed $25,000 Fairfax profit is delivered tomorrow. Fingers crossed and we'll let you know in the next edition.
That's all for now.
Do ya best, Stephen Mayne
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