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Jim Babcock and Phil Green...still generating fees.

CBD

Cleaning up among the pets 

Jim Babcock has been a hard man to track down lately. But pet owners can feel reassured that their cats, dogs, goldfish and budgerigars remain in good hands.

The co-founder of the collapsed Babcock & Brown and his sidekick, Phil Green, still appear to have a passion for fee-generating dogs through their interest in a chain of 14 veterinary practices in Sydney and Melbourne.

This column was pleasantly surprised to see Babcock & Green still have a stake in the vet business that appears to have forgotten to change its name, Babtec Holding Pty Ltd.

Even better, Phil Green is still one of the group's directors. And it seems the debt crisis has not affected veterinary care in the way it has the aviation leasing, infrastructure, Israeli telephone book and leveraged investment sectors.

"The veterinary business is going pretty well, it's delivering dividends to us," explained a Babtec director, Colin Resnick. However, it appears Babtec (which used to be called Petsfirst) has shied away from its initial plan to list on the Australian Securities Exchange.

Resnik, who helps run the investment group of the former Hoyts boss, Peter Ivany, also stressed it was important to distinguish Babcock & Green's involvement in the pet business from their former firm.

"It's not Babock & Brown, it's them in their personal capacity, and they are relatively small holders," said Resnick. According to the records of the Australian Securities and Investments Commission, Green has a 36 per cent stake in Babtec, and Babcock has a 15 per cent stake.

The other large chunk of the business is owned by one of Melbourne's richest clans, the Libermans. This column wonders who is cleaning up the doggy-do.

Firing practice

Australia's wannabe answer to Donald Trump without the bad hair, the Wizard Home Loan founder, Mark Bouris, appears keen to dodge any negative publicity in the lead-up to the airing of Australia's version of The Apprentice reality TV series.

Bouris has quietly resigned as the chairman of Ashington Group, the property developer which has the residents, poodle walkers and shopkeepers of Double Bay up in arms over its plans to build two 15-storey towers.

It just happens Bouris officially slipped out the door a week before Ashington relodged its development application for the $350 million high-rise development late last month. But according to a spokesman for Bouris, things were just getting a tad too busy.

"It doesn't have anything to do with Double Bay," he assured CBD. "He wasn't directly involved in the business. He really was far too busy with his other interests that he has direct control over," the spokesman said.

Wonder if Bouris had time to go through the 1000 written objections to Ashington's multi-storey project, which has now agreed to slash the height of its tallest tower by a whopping 29 centimetres.

Perhaps he just realised it is a good idea not to upset the Eastern Suburbs set and, more importantly, any potential future investor base. Or maybe Bouris fired himself in a warm-up to firing other people on TV.

At least Bouris's sideline investment group, BBB Capital, has kept its 25 per cent stake in Ashington. BBB is managed by Bouris's younger brother Adrian. Bouris also appears to have at least one fan. Someone has established a fan site honouring the "dynamic businessman".

Morning tea

Tributes should be pouring in for Caliburn Partnership's joint chief executive, Simon Mordant, today. He hits the half-century mark.

CBD inquired how Mordant's colleagues at the Chifley Square headquarters were preparing for the big event. "We'd normally have morning tea for anyone's birthday," Calliburn's other joint chief executive, Ron Malek, assured CBD.

"But I don't think anything's planned beyond that."

A moment's peace

Qantas's former union basher, Kevin Brown, has popped up as human resources manager of National Broadband Network .

Brown should have it pretty easy for some time, having just left a 36,000-strong enterprise full of lefties for a business that currently has a workforce of about three. It appears his main job at the $43 billion NBN will be ensuring its new chief executive and ex-Alcatel-Lucent operative, Mike Quigley, stays in line.

Brown will also have to keep a tight leash on the Citigroup's former Sol Trujillo-watcher, Tim Smeallie, who is the project's head of commercial strategy. Wonder if Brown is taking a pay cut. He was paid $1.6 million in his final full year at Qantas.

Dr Ed's visuals

Primary Healthcare's chief executive, Ed Bateman, has resubmitted his plans for his $13.5 million Mosman property, one week after the local council ordered a stop to the redevelopment. This was after it was found Dr Ed got a little carried away with his "alterations and additions".

Dr Ed's architects have now reassured Mosman council there is no plan to change the essence of the property. "Other than for excessive demolition of walls and portion of the roof, all work has been carried out strictly in accordance with the approved plans," the new application says.

"Accordingly, the end result will be visually identical to that previously approved by council." Makes you wonder why Dr Ed has spent more than two years and more than $1 million redeveloping a property that will end up looking like it simply had an alteration.

Got a tip? email srochfort@smh.com.au

Xchange

 Edited by Jamie Freed

Fast float: estimates of Myer's value hit $2.5b and counting 

All eyes will be on Myer this morning as the retailer releases its latest results and starts the pre-marketing of its expected float.

The strong performance of Carsales on its first day of trading yesterday – it closed at $3.99 versus a $3.50 offer price – will have buoyed Myer and its lead advisers at Goldman Sachs JBWere, Macquarie Securities and Credit Suisse.

But this will be a much bigger offering, and it is important that they don't get too cocky and overprice the Myer raising. Some observers are already sceptical that Myer will be worth the mooted $3 billion enterprise value being whispered around the market.

Assuming Myer retains about $500 million of debt after the raising, that would ascribe an equity value of $2.5 billion. Rival David Jones coincidentally has an equity value of $2.5 billion – but almost no debt.

DJs was expected to earn about $150 million last year, compared with about $100 million for Myer, although their earnings before interest and tax are more equivalent. Myer is likely to try to position itself as a growth stock with perhaps more upside than DJs in light of Myer's plans to open 14 new stores by 2014.

That could help make up for the earnings and debt disparity. Myer brings in more revenue than DJs, but it remains a lower-margin business, even after its private equity owners at TPG stripped out costs over the past few years.

It remains to be seen whether those cost cuts are sustainable or if the costs will need to start creeping back in after a period of under-investment. Myer is looking to issue a prospectus by the end of the month and hit the bourse by November, which some have noted is astoundingly fast.

Perhaps not coincidentally, interest rates are expected to start to rise about then, by which time Myer's owners will have already banked the cash from the offering.

Myer is also likely to have strong comparable sales figures on show in its glossy marketing material because its sales had fallen 4.8 per cent between July and September last year as the economy weakened.

Myer is likely to be just the first in a string of high-profile sell-downs by private equity groups, with Kathmandu and Link Market Services among the others in the queue.

Goldman Sachs JBWere has already snared Kathmandu, but a parade of investment banks is believed to be lining up to take part in a potential $2.5 billion float of Link by Pacific Equity Partners.

Energy in the market

AGL Energy and Origin Energy have long talked the talk about buying at least some of the electricity assets being sold by the NSW Government.

Now that the Government and its advisers at Credit Suisse and Lazard have outlined a formal timetable, it will be interesting to see if the utilities follow through. Bidders will be allowed to pick and choose among the suite of retail and GenTraders on offer.

It is no secret that AGL and Origin are interested in the retail side of the equation, but it remains to be seen whether they will want the coal-fired GenTraders or if they might be more interested in some of the gas-fired development projects available.

The Government's decision to allow a blend of full and periodic payments could assist with the financing. AGL has about $700 million of borrowing capacity – enough to fund its current plans and maintain a BBB rating – but it would need to raise equity for any big purchase in NSW. Origin has plenty of cash available after selling half of its coal-seam gas assets to ConocoPhillips, but it also needs to fund the commercialisation of those assets.

Merrill Lynch reckons that may leave it with only $360 million in spare cash, meaning it could raise equity to buy the NSW power retailer EnergyAustralia and/or other assets.
The GenTrader assets are being sold in five separate parts, two of which are held by Macquarie Generation.

Back in May, Merrill Lynch said the Macquarie Generation assets would be the most attractive to Origin and AGL in light of more secure coal supply contracts, and could add 11 per cent to 17 per cent to their earnings-per-share in the near-term.

Babcock bounce

There seems to be little logic for the 17 per cent rebound in the daytrader darling Babcock & Brown Infrastructure to 5.4c yesterday. In fact, on Wednesday evening its investor relations manager, Helen Liossis, called it quits after three years with BBI.

Her new employer, the Federal Government, has a AAA credit rating, compared with the B1 rating with a negative outlook to which Moody's lowered BBI's debt this week.

Xchange hears the potential deal with a cornerstone investor – if it does occur – is not likely to be finalised for another four or five weeks, although the timetable is understandably being dictated by the banks because they hold most of the cards.

BBI has yet to gain a roll-over on $205 million of debt in its PD Ports business that is due for repayment next month. The loss of that asset due to a default would allow its corporate lenders to call on $1.2 billion of debt and topple the company if they so wished.

Of course, that may not allow the banks to recover all of their debt because the assets are geared to the hilt. In the meantime, UBS has run the numbers on BBI based on some assumptions about the investment from the cornerstone investor.

It warned that in some scenarios, the value of BBI equity could be worth "nil" due to the massive dilution involved.

Share shedding

Boart Longyear's underwriters at Goldman Sachs JBWere, Macquarie Capital, Merrill Lynch and RBS have turned to institutional sub-underwriters to offload $117.5 million of shares after retail investors took up a lacklustre 37 per cent of that component of the $756 million recapitalisation.

The shares were offered at 27c each, compared with the driller's closing price of 28c yesterday. Boart's shares had traded at 52c before it announced the capital raising, but the slim discount on offer now clearly underwhelmed retail holders.

Credit Suisse reckons there could be further downside risk to the share price as the share register settles. It also warned trading conditions remained poor for Boart, based on first-quarter results of its rival Major Drilling this week.

xchange@smh.com.au