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CBD

King cuts a deal with creditors  

MFS Limited’s founder and polo enthusiast, Michael King, has dodged bankruptcy after striking a deal with his creditors for more than $130 million of debts.

Last month King’s creditors quietly agreed to a two-year ‘‘personal insolvency agreement’’ with the founder of the financial group, which collapsed last year owing more than $1 billion.

The former MFS chief and his co-founder, Philip Adams, still owe $127.2 million on margin loans they took over their now worthless 13 per cent stake in the company, once worth more than $440 million.

King is nowlocked into an agreement that will require him to make undisclosed payments to his creditors. Good luck. According to documents filed to the insolvency trustee, King’s assets include a laptop and iPod music player (worth a collective $800) and somewatches and a wedding ringworth $2000.

The former BRWrich lister also had $60.26 in a Commonwealth Bank account and minus $23,442.51 in another account.

One asset not included in the filingwas a patch of turf King purchased inland fromthe Gold Coast for more than $6 million, which is nowhis polo farm, Elysian Fields.

Given the polo field is held in trust on behalf of King, it would have been out of reach of creditors had the MFS founder been declared bankrupt.

But under the deal struck with creditors last month, the farm has been included. The trustee of the agreement, the Grant Thornton partner Nick Mellos, declined to provide details, noting more information would have been publicly available had King been declared bankrupt.

But he stressed creditors could expect to get more out of King through the deal than if he had been declared bankrupt.

In his original filing to the bankruptcy trustee in April King noted he had flogged his Mercedes Benz to a used car dealer on the Gold Coast for $43,000. There was $231,000 from shares, including a small holding in Fone Zone, and $150,000 for his half share of a holiday house at Mount Hotham that was jointly owned by a Kate Manka.

It is unclear if it is the same Kate Manka that is married to the former MFS chairman Paul Manka. King’s (and Adams’s) creditors include the Westpac-owned BT Financial ($41 million) and St George ($26 million), NAB ($22 million), CBA($12.6 million), Lift Capital ($13.7 million), Macquarie ($7.5 million), Adelaide Bank ($4.4 million) and the TaxOffice ($15,293).

Numbers man

After the insolvency agreement, a raft of companies owned by King, such as Black Teak Pty Ltd and Elysian Fields Canungra Hotel Pty Ltd, adopted their company numbers (ACNs) as their new names.

At least King’s Canungra Property and Subdivisions’ catchy newname, ACN 097679788, is better than its original name, Bradmat Sunshine Coast Weed Control Pty Ltd. King has been replaced as the sole director of all of his business interests by the Gold Coast private eye Michael Featherstone, who was a little cagey to CBD about his new role.

‘‘I’m not trying to be rude, I just don’t have any comment,’’ he said. He failed to say whether the name changes could relate to King wanting a more reclusive lifestyle.

A former policeman, Featherstone now runs a private investigation and ‘‘risk management’’ business and recently authored the book, Bullet Proof Your Business.

Pay up or else

Phil Adams, who moved to Dubai in 2007, remains elusive. Let’s hope he keeps up with his bill payments over there. The United Arab Emirates still has debtor prisons for people unable to pay their dues.

Doughnut futures

A solution to the impasse between the John Kinghorn chaired RHG board and a group of disgruntled shareholders has come to hand.

Lastweek a group of shareholders led by the research firm Intelligent Investor called an extraordinary meeting to oust the former Allco Finance Group chief David Coe as a director at the mangy financial concern formerly known as Rams Home Loans.

Intelligent Investorwants to replace Coe with two of its own. But given RHG shares three directors (Kinghorn, John McGuigan and Greg Jones) with Kinghorn’s other business concern, Krispy Kreme Australia, it might also make sense to merge the two.

For one, this could usher in another financial engineering doughnut to compete with Macquarie Bank (aka the Silver Doughnut).

Not musically inclined

JP Morgan has poured coldwater on the latest musical chair rumour in investment banking, pushed along by this column.

The talk circulated in CBD yesterday was that Credit Suisse’s property banking team of David Dixon, Stephen Burns and Chris Bedingfield could be eyeing some vacant desks at JP Morgan.

But the bankwas quick to respond yesterday, noting the gossip had ‘‘no basis’’. ‘‘Not even one conversation has been held,’’ a senior JP Morgan banker said in an email.

Without bubbles

In these fiscally challenging times, the advertising sector is particularly alert to how clients may perceive the lifestyles of ad men and women. Long lunches and snorting cocaine off a hooker’s backside are definitely not on the cards, let alone billed to the clients.

Sowe can understand M&C Saatchi for feeling a tad sensitive about the name of its newc hief beancounter, Jeff Krug. M&C was quick to assure CBD that Krug, who shares his name with a not inexpensive drop of champagne, was fiscally temperate.

It is not the first time an employee at the advertising agency has had a name with the potential to cause embarrassment. When the agency had justwon the ANZ account, it selected the best suit in the building to run the account and introduced him to the client.

It was only when the bankers gathered round the table to meet him that it dawned on the agency’s chief executive that the man chosen for the job was the aptly named Rob Banks.

CBD hoped that he didn’t.


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

 

 

Xchange

Edited by Jamie Freed

Add a few diamonds to the friendship ring

BHP Billiton and Rio Tinto can play down the idea of a looming diamond joint venture.

In public, all they want to do is shift attention to their much larger planned alliance in iron ore, but there now can be no doubt the pair are involved in preliminary talks on a diamond deal. Robert Gannicott, the chief executive of Harry Winston Diamond, Rio's 40 per cent partner at the Diavik diamond mine in Canada, has confirmed to analysts that a merger with BHP's nearby Ekati operation was being examined as a means to cut costs.

But the "investigative work for this", he said "has not yet started". Gannicott said everything was on the table in the talks, but noted obvious places to start included connecting the two power plants and the administration units.

He also left open the possibility of a common processing plant, as Xchange foreshadowed last month. The diamond market, which has been depressed by the global financial crisis, is showing some signs of a rebound, and Rio is expected to resume work on its Argyle expansion in Western Australia next year.

As for joint ventures, iron ore remains the first priority for BHP and Rio because it is a much more important contributor to earnings than diamonds. But diamonds are not likely to be the last of their joint venture talks beyond iron ore – mineral sands and coal are expected to be on the list, too.

BHP's push for these alliances is a further demonstration that there aren't many obvious buys in the mining sector for the Big Australian other than Rio.

Last month BHP bemoaned the lack of top-tier mining assets on the market, and Morgan Stanley wonders if it should not start lowering its standards for copper acquisitions in light of its lack of near-term growth options in that metal.

However, BHP's decision to pass on OZ Minerals' Prominent Hill mine when it was for sale at the bottom of the market indicates it is not ready to drop its high standards just yet. For now, the most obvious acquisition opportunities for BHP are more likely to be in oil and gas than in mining.

Drunk to excess
 
It appears lending in the NSW pubs industry has left the big four banks with a rotten hangover.

The big lenders are understood to have appointed the property advice teams at PricewaterhouseCoopers, Ernst & Young and Korda Mentha to look into the huge write-downs of the past year. The banks lent the NSW hotel industry about $7 billion in an aggressive investment push into the industry over the last five years.

But about 30 per cent of the total, or $2 billion, is now said to be hard to recover because of the plunging value of hotels. The advisory firms have been asked to look at how the slump in prices has come about; how they can claw back their loans; and how banks can better avoid getting caught out next time.

OZ spends a few coins

OZ Minerals has finally started to dip into its $1 billion pile of cash, at least in a small way. The copper miner has allocated nearly $20 million towards maintaining its 49.9 per cent stake in the uranium hopeful Toro Energy.

Toro entered a trading halt last week as it sought $15 million from institutions just one day after Paladin Energy raised $419 million. But after receiving bids from institutions for nearly four times as much as it was seeking, Toro increased the size of its raising to $40 million.

OZ decided to chip in to maintain its stake as part of the 15c-a-share raising conducted by Helmsec Global Capital. The full details are to be announced today, but there is word Toro may also offer a share purchase plan to allow retail investors some participation.

Toro owns the $170 million Wiluna project in Western Australia, which is on track to be one of the first uranium mines in that state. It has a production target of 2012.

The new funds will allow it to complete its bankable feasibility study by the end of next year and to progress a new joint venture with Cameco. It also means Toro will not have to activate a $20 million back-up facility with YA Global that was set up last month.

Resource Capital Research also seems to think some acquisitions could be on the cards. Once Wiluna is in operation, it could prove an attractive hub for developing other smaller uranium deposits in the region, including those held by U308, Liberty Resources, Norilsk and Encounter Resources.

Changes in the forest

There could be some significant changes to the tight Forest Enterprises Australia share register following the trading halt called by the company yesterday in order to raise capital.

Elders owns 31 per cent of it, and Gunns owns 18 per cent. FEA's recent accounts listed $208 million of debt as a current liability because it had breached its banking covenants.

The covenants are expected to be reset, but it would not be surprising if the banks hinted that they would be more comfortable about tweaking the covenants if FEA raised some cash. FEA also has $107 million of investment properties and loans that are slated for sale as part of its plans to repay debt.
 
It is interesting to note FEA shares traded on high volumes on Friday compared with the rest of the week, although they only fell 1c to 18c. But Xchange hears Elders and Gunns were taken by surprise by yesterday's raising.

It appears Elders is unlikely to tip any funds into it after raising at least $475 million itself in a deeply discounted issue this month to stave off the threat of administration. In the longer term, Elders is not likely to want to maintain a minority stake in FEA, and the dilution caused by the new equity issue could make the stake easier to offload in the future.
 
Gunns, which recently raised $45 million beyond the $100 million needed to buy timber assets from Elders, would appear to be more likely to take part. Gunns picked up its stake in July, indicating a much more recent interest in FEA than Elders.

xchange@smh.com.au

 

Business Focus

Felix offer

China's Yanzhou Coal Mining has resubmitted its takeover application for Felix Resources to the Foreign Investment Review Board. Yanzhou has made a friendly offer for Felix, valuing the target at more than $3 billion, subject to approval by regulators in both countries and shareholders. Felix said there had been no material amendments to the application.

Bendigo raising

Bendigo and Adelaide Bank has raised $121 million from small investors as part of a capital raising that secured almost $300 million to replenish its balance sheet. The lender said it had received strong demand for the retail component.

AMP jobs move

As many as 70 jobs could be lost from AMP's Melbourne-based operations as a number of roles are relocated to its Sydney headquarters. It continues a cost-cutting program under chief executive Craig Dunn.

Rio sale approved

Rio Tinto is on target to reduce debt by $US10 billion this year after receiving approval to sell its Corumba iron ore mine in Brazil to Vale. The sale, announced in January as Rio tried to appease investors and slash debt, was conditional on approval by the Brazilian National Defence Council.

Sigma vitamins dip

Sigma Pharmaceuticals is launching a new marketing program for its supermarket vitamin products after a slump in sales. Profits rose 5 per cent to $32 million for the half year to July, but the pharmaceuticals arm fell 8.4 per cent due to a decline in vitamin sales.

Leighton gets the nod

Leighton has has been selected by the Victorian Government to construct the $200 million western freeway route between Melton and Bacchus Marsh, west of Melbourne.