Executive Summary: September 02, 2009
By Scott Rochfort | smh.com.au | 02 September
Elmer Funke Kupper wants Sydney swingers to join in. Cartoon: John Shakespeare
CBD
Casino keen to get its rock off
The winds of revolutionary change crop up in the most surprising places. The Bastille. Red Square. The Berlin Wall. Imelda Marcos's shoe cupboard. Star City Casino.
The chief cadre of Tabcorp Holdings, Elmer Funke Kupper, and his comrades are working on plans to summon the people of Sydney to tear down one of the city's much-loved landmarks: the multistorey fibreglass rock inside Star City's main atrium.
"We are looking to have a Berlin Wall-type ceremony where people can smash it up," a Star City spokesman, Peter Grimshaw, explained. "We think Sydney would like to see the end of it." Tabcorp is hoping to hold the event before the end of the year, pending some final checks to the fibreglass structure.
"We're just doing some checks to see if we can do it safely," Grimshaw said. It is not known if people will be able to take home a piece of the rock, which was built in the 1990s by Leighton's Wal King. "We'll be happy to invite those who hate it the most and give them a sledgehammer," said Grimshaw.
Redevelopment of the casino is under way but the rock has been on shaky ground since it took up a large portion of the $37 million write-down Tabcorp booked on Star City last year.
For Tabcorp's sake let's hope the smashing of the rock does not start a widespread revolt against pokies or baccarat. It is not the first time an artificial rock has hit hard times in Australia.
In 1992, the Leyland Brothers' theme park north of Newcastle went belly-up after their large-scale replica of Uluru failed to attract enough visitors.
Sailing away
The veteran Queensland director Jim Kennedy has hung up his last board seat, after announcing plans to retire as deputy chairman of the toilet-making concern GWA International.
After 36 years of sitting on some of the nation's most prominent boards – including Qantas, ASX, Australia Post, the Commonwealth Bank, Suncorp Metway, the Australian Tourism Commission and the Brisbane Amateur Turf Club – Kennedy said he had no plans to take it easy.
"I'm flat out, actually. I play golf, I've got a 45-foot boat. I'm not one of those retired old blokes."
The 75-year-old, who until recently was also a director at Therese Rein's employment concern, Ingeus, hinted his "retirement" may have more to do with him now being too old to make tax-effective contributions to his superannuation account.
The man who helped found the Queensland Investment Corporation, and who has chaired several government inquiries, was never afraid of the odd stoush.
This was clear when he drew the ire of the Melbourne establishment by shifting the headquarters of the Tourism Commission to Sydney in the 1980s, and more recently when he leapt to the defence of his embattled fellow NAB director, Catherine Walter. But Kennedy still has a few dilemmas in store.
His 45-foot cruiser is too big to fit under the bridge leading to his new 1048-square-metre waterfront home near Bribie Island, north of Brisbane. "I can't get under the flying bridge," he said. At least Kennedy still knows when to pick the bottom of the market.
He bought the three-bedroom pad for $1.6 million in April, which compared with its previous selling price of $2.5 million in 2005.
What's in a name?
In order to help Babcock & Brown Power (BBP) find a new, Babcock-free name, CBD readers put their thinking hats on and came up with these: Bold and the Beautiful Power, MyStock Went Sour, MBD (Must Be Dreaming), Smoke & Solar Panels and Bloody Bad Power company.
Ants in their pants
The highly expensive game of musical chairs being played across town by the property teams of several investment banks and brokers continues.
At Credit Suisse's broking arm, the property research team allegedly abandoned spreadsheets yesterday after the bank tried to dispel talk it was about to lose the investment banking property team it had paid a reported $20 million to poach from Deutsche Bank in 2006.
Last night it appeared that Credit Suisse had held on to David Dixon, Stephen Burns and Chris Bedingfield, who helped to advise Allco Finance Group on its successful acquisition of the property fund manager Rubicon in late 2007.
CommSec is believed to be on the prowl, and no doubt JPMorgan is after talent, too, since losing its team to UBS last week, which was forced to fill desks when its own team vacated them for Merrill Lynch.
Talk has also centred on Hugh McDonald and his team at Deutsche Bank, rumoured to be updating their resumes.
US injection
The retractable syringe powerhouse Unilife has come up with a bizarre plan to join News Corporation and shift its domicile from Sydney to the US state of Delaware and list on the Nasdaq.
Even though the much larger US-focused companies Cochlear and CSL are happy to remain listed in Australia, Unilife said yesterday the move was "designed to make Unilife Australia a more attractive investment for local and international shareholders by creating a structure which the board believes will provide an increased opportunity to broaden the potential scope, liquidity and depth of the company's shareholder base, while maintaining strong ties with Australian investors".
The company, chaired by the former Sydney bus king Jim Bosnjak, said it plans to cancel the options under its ASX listing and issue replacement options "under the proposed option scheme of arrangement between Unilife Australia and its option holders". It failed to say what the scheme of arrangement was.
Last year Unilife managed to "continue to motivate [the] outstanding ongoing efforts" of its chief executive, Alan Shortall. Shareholders passed a resolution that Shortall, on top of his annual options package and $200,000 cash bonus, be given a "bonus" 10 million shares or 5 per cent stake in the company, partly as a result of his role in the company's "initial public offering" in 2002.
The company did not have an IPO as such but was backdoor-listed.
Business Focus
Kirk pockets $4.1m
The former Fairfax chief David Kirk received a $4.1 million termination payment, despite the company's $380 million loss for 2008-09. The news comes soon after the introduction to Federal Parliament of laws that will allow shareholders to vote on executive termination payouts of more than one year's pay. The current chief executive, Brian McCarthy, received a total package of $2.07 million, down from $2.43 million last year. Mr McCarthy's base salary of $1.3 million will increase to $1.5 million on October 1.
Soros backs Marengo
Hedge funds run by the billionaire New York investor George Soros have emerged as backers of plans by the Perth-based Marengo Mining to crack it as a copper and molybdenum producer from its Yandera project, south-west of the Papua New Guinea seaport of Madang. Soros funds have taken up the bulk of Marengo's $16.3 million in share placements, giving them a 19.9 per cent stake in the company.
Beaconsfield sale
Malaysia Smelting Corporation Berhad will offload its 22.1 per cent stake in Beaconsfield Gold as it focuses on its core tin mining and smelting.
Gas output soars
Australia could become one of the top 10 countries by gas reserves, according to a report, which shows the nation's output benefiting from the liquefied natural gas boom. EnergyQuest's latest quarterly report shows Australia's total gas production rose 4.8 per cent in the year to June to a record 1779 petajoules.
Timber group in red
The timber group Forest Enterprises Australia, which has retained its independence after asset sales by its biggest shareholder, Elders, is confident a better economic outlook will enable it to bounce back from a loss in the last financial year. Forest Enterprises reported a loss of $14.1 million for 2008-09, after a net profit of $43.6 million the year before. The directors did not declare a dividend.
XChange
Edited by Jamie Freed
Fortescue tipped to pay heavy price for refinancing
With the market continuing to speculate over the likely composition of Fortescue Metals' mooted $US6 billion ($7.1 billion) debt-financing package from China, Credit Suisse analysts have taken a stab and guessed the miner will be paying an interest rate of about 8.5 per cent on the debt in a 60-page note initiating coverage on the stock.
In Western terms, that would be a great rate for a B-rated company such as Fortescue. But Xchange hears the actual terms will be closer to those fellow iron ore miner Gindalbie Metals is receiving from China Development Bank (CDB).
Gindalbie, backed by its Chinese partner, Ansteel, is in final talks about a 12-year, $US1.2 billion facility with a cost of US Libor plus 300 basis points.
CDB is attempting to syndicate the Gindalbie facility to spread the risk around, but not surprisingly, it is not finding much interest from non-Chinese lenders.
The terms are uncommercial in the eyes of Western banks. In return, CDB will receive security over the iron ore assets owned by the Gindalbie-Ansteel joint venture. As for Fortescue, the final structure of its funding package remains to be seen, with the targeted completion date of September 30 viewed by some as ambitious.
Any deal is complicated by the rights granted to Fortescue's existing bondholders, which require any expansion to be funded by equity or internally generated cashflows. Credit Suisse said that could point towards the Chinese funding taking a hybrid form, such as preference shares, that was called equity but behaved as if it were debt.
That would avoid giving the Chinese security over the assets, with Credit Suisse expressing concern it would not be difficult for China to send the highly geared Fortescue into administration if it had security.
However, at this point, a debt deal is believed to be more likely than preference shares, meaning the bondholders will be repaid or possibly asked to vote to change the covenants.
Buyers feeling lucky
The NSW Government clearly has bigger problems on its hands than its attempt to sell NSW Lotteries for about $500 million, but that hasn't stopped eager corporate buyers from expressing interest in the assets.
The Premier, Nathan Rees, has been forced to seek aid from the Opposition to get enough votes in the upper house to approve the sale – a bill that was slated to be passed by June 30.
Plenty of potential buyers have informally expressed their interest, but the Government's advisers at Goldman Sachs JBWere are unable to allow them to conduct due diligence until the bill is passed.
However, the sale could be wrapped up within four months once it receives the green light from Parliament because most of the likeliest bidders have made their interest known. Tatts, which controls lotteries in Victoria, Queensland, ACT and the Northern Territory, has not been shy about registering its interest in the auction.
Greece's Intralot, which has lotteries in Victoria and Tasmania, is understood to be keen. Tabcorp and some offshore operators have also expressed interest, as has a consortium led by the Newsagents Association of NSW and ACT.
The longer the Government takes to approve the sale, the more likely that at least some of the interested parties will be distracted by other opportunities, including TOTE Tasmania.
Nexus aims for $70m
Nexus Energy entered a trading halt yesterday to raise about $70 million through a rights issue and placement with help from Southern Cross Equities.
At least $15 million is likely to be put towards covering a newly disclosed cost blowout on its now $315 million Longtom project at the request of its banker, BOS International. Nexus, advised by Deutsche Bank, had agreed in May to sell 50 per cent of Longtom to AED Oil for $155 million. AED, which recently halted production at its only producing asset at Puffin, is believed to be keen to complete the deal to regain cashflows.
It has had issues organising a financing package, and it remains to be seen whether the deal will be finished.
Meanwhile, Nexus is in preliminary talks to sell up to 45 per cent of its Crux project after a deal to sell 25 per cent to Mitsui for $US255 million fell over last October. As Osaka Gas is a partner, Nexus had talked mostly to Japanese parties last time around, but this time it could speak with a broader group. No better for Elders
The Elders recapitalisation process has been compared to a float due to the complicated nature of undertaking a one-for-one rights issue and placement to raise up to $500 million. A bank holiday in Britain – home to many Elders investors – on Monday did not help matters.
Elders could release its annual results as early as today, with a definitive placement price to be announced, but there is a chance it will need more preparation.
xchange@smh.com.au
First published by Smh.com.au on September 02 2009
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