Executive Summary: September 04, 2009
By Scott Rochfort | smh.com.au | 04 September
Ed Bateman ... just fancies making a few changes to his Mosman pad.
CBD
Council to Dr Ed: drop the hammer
Primary Healthcare chief doctor Ed Bateman appears to be having trouble settling into the humble Mosman waterfront cottage he purchased for $13.5 million in late 2007.
Dr Ed and his demolition team appear to have got carried away with the "alterations and additions" outlined in his original development application, which included extending the driveway, some new decks and bigger windows.
Mosman Council has now ordered a stop to the redevelopment after an inspection of the site on Monday found Dr Ed may have knocked out a wall too many.
"The extent of demolition brings into question whether the works on site can be properly reconciled with the description and content of the approved development," says a letter from the council to the Primary Healthcare managing director, his wife and his architect.
"If this is so, then it is council's view that the development can no longer be characterised as alterations and additions and that either a new DA is required for a new building or a new DA is required for the erection of walls in replacement of those demolished," the letter said.
Apparently the Mosman Mayor, Dom Lopez, is not happy. Going by the pictures made publicly available by Mosman Council, the $1.8 million of alterations have included just about the entire house apart from its lofty roof line.
It seems things got off to a bad start between Dr Ed and his neighbours when the person he purchased the house from, the former Liberal Party federal treasurer, Mark Bethwaite, allegedly tried to arrange a meet and greet. No one turned up, not even Dr Ed. But going by his epic takeover battle for Symbion Health, maybe Dr Ed is in no hurry to settle this dispute any time soon.
He failed to return calls.
Tattersalls saved
It helps to be a club with well-heeled members. The Tattersalls Club on Elizabeth Street has dodged financial oblivion after its members coughed up $3.5 million to help replace a debt its banker NAB had called in.
"Flying in the face of the global economic downturn, Tattersalls Club members have rallied strongly and dug deep to pledge to the club the required funding to fully refinance our bank debt and ensure the future of our 150-year-old club," said Tattersalls chairman and legal eagle, John de Mestre, in a letter to members.
"All members should be extremely proud of this milestone in our history."
But the celebratory drinks are not expected to flow until tomorrow's raceday at Randwick. The members who have pledged to the Tattersalls Club Members Note offer will have to cough up their dues (or have their cheques clear) by today.
The rescue effort comes three weeks after the club said it "was extremely surprised at the lack of widespread support", after only 96 of its 1100 members had pledged $1.37 million for thenote offer.
Members may also have to dig deeper as the Elizabeth Street club opposite Hyde Park investigates a "user pay" business model.
Apparently one key factor which caused the club "significant financial distress" were the losses racked up by its "food and beverage operation".
The club, which now allows women the honour of becoming "associate members", racked up a $193,181 loss in the 18 months to June 30. The only part of the club still off limits for women is the male-only gym.
In an attempt to appease the opposite sex, the club is planning a breakfast next month to help raise money for the National Breast Cancer Foundation and the McGrath Foundation. But be prepared to be grossed out.
There is talk some of the club's committee members are planning a "Full Monty" routine.
Vintage's top drop
Finally some good news for the debt-stricken Australian Vintage.
The winemaker, which has a modest $151 million of borrowings, boasted yesterday how it won "top spot in the world's biggest wine competition".
It noted how its Nepenthe Ithaca Chardonnay won the best chardonnay at the 2009 Decanter World Wine Awards.
"Opulent, graceful and lengthy. Fantastic," noted the Decanter judges, which judged the wine as the best in its class above £10.
Jacobsen consults God
God (aka the Almighty) appears to have entered the corporate turnaround business.
Entertainment whizkid Michael Jacobsen has turned to the big man for some help in resurrecting his crumbled Arena Management empire.
Jacobsen, from London, has proposed a deed of company arrangement to the administrator of Arena after having "consulted God on this matter".
It remains unclear what the Almighty makes of the Jacobsen family's involvement in productions such as Dirty Dancing. Jacobsen also noted in his letter he had been "suffering from some ill health requiring an operation in South Africa".
He also blamed Arena's problems on the Sydney Entertainment Centre "which has been cursed for some years now". The Jacobsen family in April 2003 broke the ASX record for the most excuses in a profit downgrade, for their listed Jacobsen Entertainment group that slipped into administration five months later.
In that downgrade, the Jacobsens blamed their troubles on the "uncertain and erratic economy", "the impending [Iraq] war and actual commencement", "the terrorism threat", "massively falling stockmarket and corporate profits in general", "job uncertainty", "the drought", "the general 'stay home' attitude" and a "cyanide bomb threat" at a Bruce Springsteen concert in Auckland.
Got a tip? email srochfort@smh.com.au
Business Focus
Fowler to pay costs
Robert Fowler, the retired investor who lost his $1.5 million life savings in the collapse of Opes Prime, now faces a huge bill for legal costs after losing his courtroom bid that challenged a $253 million deal between fellow creditors and Opes's banks. When liquidators pay 37c in the dollar to creditors later this year, Mr Fowler will receive about $550,000. But he will have to set aside at least $100,000 to pay legal costs.
Bank faces class action
BankWest may face a class action by commercial customers angry over changes the bank made to their lending facilities last year. Aggrieved customers are said to be prepared to pursue their claims in court.
Boost for Metcash
Grocery distributor Metcash has agreed to supply the supermarkets and liquor stores that Foodworks will buy from Coles. The deal is expected to add about $250 million of sales to Metcash in the first full year of operation.
Jet deliveries deferred
Recession-hit Singapore Airlines has agreed with Airbus to defer the delivery of eight A380 superjumbo jetliners by up to 12 months. The airline, which posted its first quarterly loss in six years during the June quarter, already has nine A380s in operation with two more due for delivery in the current financial year.
BHP seeks ports deal
BHP Billiton is attempting to cut a deal with the NSW government to end a deadlock over congestion at the Port of Newcastle.
Paladin in M&A hunt
The uranium miner Paladin Energy is hunting for merger and acquisition opportunities but says it is not in talks with Chinese and Korean companies about potential joint venture transactions.
Xchange
Edited by Jamie Freed
Iron ore price slump may hit BHP Billiton and Rio
In a development which could resurrect the pricing spat between iron ore miners and China, the spot price of iron ore, which reached more than $US100 a tonne last month, has crashed.
BHP Billiton and Rio Tinto are not selling much iron ore on the Chinese spot market these days. Instead, they are selling to customers on a provisional price of about $US60 a tonne for fines, based on the Japanese benchmark.
The benchmark price excludes shipping. If shipping is also excluded from the current $US77 a tonne spot price, spot sales of iron ore are selling for just $US63 a tonne – just a few dollars more than the benchmark.
The situation has changed so dramatically in the last fortnight that higher-cost producers in India that typically sell on the spot market are mulling cuts to output. To date, BHP and Rio do not appear to have experienced a drop in shipments. Xchange hears Rio was flat out in August, with shipping and production around record levels.
But price could start to become an issue. In the past, when the spot price in China has dipped below the benchmark price, it has refused to continuing paying the higher price embedded in contracts.
Privately, miners say that in contrast with the firm agreements with Japanese and Korean producers, contracts with China are like options that come with no upside and unlimited downside for Australian miners.
Chinese steel prices are starting to fall, and there are fears iron ore imports could as well. If so, that could signal a tougher second half for iron ore miners and perhaps a good opportunity for investors to pick up BHP and Rio shares at a relatively cheap price.
Meanwhile, the market is waiting for any signs of an update on the BHP-Rio iron ore joint venture, even a more concrete guide on the timing of a decision by the European competition regulator.
The iron ore joint venture has been described by many as a win-win proposition for both, but a much bigger win for BHP. Rio announced the deal on the same day as its $US15 billion ($17.8 billion) rights issue, the cynics would say in part to help prop up the share price after spurning Chinalco.
Now that Rio is not in dire straits, some wonder whether it should go through with the joint venture since it will, in effect, be selling a decent chunk of its production to BHP. But its finance director, Guy Elliott, recently convinced analysts the venture has Rio's full support.
Others note that Rio has considered cutting a deal like this for more than a decade.
BBI's blind date
Babcock & Brown Infrastructure appears set to reveal the identity of the private equity group seeking to be a cornerstone investor today, along with an outline of a recapitalisation plan to help erase much of its $1.2 billion of corporate debt.
BBI is said to have been in talks with the mystery suitor for some time, but the announcement being prepared for the market is likely to be a broader overview of the direction the recapitalisation plan will take rather than a final agreement with all of the nitty-gritty details.
It is likely to involve the elimination of some of the debt tied to assets as well as at the corporate level.
Shareholders in BBI have not been canvassed about a possible equity raising in the lead-up to the announcement and neither have holders of BBI's New Zealand SPARCS notes. Before the receipt of the recapitalisation proposal, BBI had planned to issue $93.9 million of shares to the SPARCS holders on the reset date of November 17 instead of making the interest payment in cash.
But after getting help from its new private equity friend – and a large rights issue to existing shareholders – BBI is unlikely to want to dilute its register any further by issuing shares to SPARCS holders, particularly in light of its last trading price of 7.8c.
BBI also has 778 million exchangeable preference shares worth $677 million on issue which are due to reset in 2012. BBI, which already has 2.6 billion shares on issue, could end up with more than 10 billion after its recapitalisation, based on a 3-for-1 rights issue to raise about $500 million.
That excludes other coinciding placements. BBI and its advisers at Gresham, Credit Suisse and Macquarie Group are well aware of the capital structure issues and are understood to be planning for an equity consolidation at a later date.
Not respecting Elders
Elders, and a slew of its advisers, lawyers and accountants, continue to work the details of its mooted $500 million or so recapitalisation plan.
They had originally hoped to release the details – along with a prospectus and Elders' annual result – on Wednesday, but that has proved a tougher ask than anticipated. It is hoped the final plan could be released to the market today, but more delays are not out of the question.
It is not unclear whether Elders has been forced to tweak its original plan – for an institutional placement of up to $250 million, a 1-for-1 rights issue to raise $200 million, and a $50 million share placement – after receiving feedback from shareholders, or if the discount would be much greater than contemplated initially.
xchange@smh.com.au
First published by Smh.com.au on September 04 2009
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