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CBD

Cudeco breaks out the bubbly

Kirin's takeover of Lion Nathan has given the Gold Coast-domiciled copper explorer Cudeco reason to smile.

Standard & Poor's announced yesterday the company will join the ASX 200 next week due to Lion Nathan's imminent delisting.

No doubt Cudeco boss Wayne McCrae might belt out a few tunes from his musical heroes Peter Gabriel and Steve Earle to celebrate.

His son, Cameron, will not have to go far to treat himself to a few cocktails, given the company seems to have been bunking him up at Hong Kong's Four Seasons Hotel for more than a year.

The hotel lists its standard rates from $HK4200 ($616) a night and on its website boasts how it "redefines luxury and excellence in a city renowned for exceptional accommodations".

It seems the folks at Cudeco have a lot to celebrate. Wayne McCrae scored an 11 per cent rise in pay to $413,050 last financial year and also upped the rent he charged the company from $123,791 to $167,781.

Cameron also did well with his total remuneration leaping to $371,015 as the group's "business development manager". The 36-year-old is also doing well in the options department. Despite only joining Cudeco in February 2008, Cameron has 500,000 options that will be exercisable at $4 from July 31, 2010.

Cudeco shares yesterday rose 24c to $5.14. Apparently the Hong Kong office "continues to provide the company with an important link to global copper businesses and investment interests".

The management at APA Group (aka Australian Pipeline Trust) might also be celebrating their inclusion into the ASX 100 with a few Tooheys and Kirins. Standard & Poor's announced the pipeline company would join the index following the departure of Lion Nathan.

Rather than liking alternative country music stars such as Steve Earle, APA's fly fishing chief executive Mick McCormack is reportedly more of a blues fan.

Logo's a go

The fee-gouged airport operator formerly called Macquarie Airports offered some insights into its logo and name change yesterday.

Doing away with the silver doughnut of its former manager Macquarie Group, MAp chief executive Kerrie Mather unveiled the new twisted grid logo which almost resembles a Mexican hammock.

The colour blue in the new logo was chosen, Mather told shareholders at yesterday's special general meeting, because it is safe. And grey was woven into the logo as well because of its "durability and resilience".

The twisted grid logo, which also looks like the set of the 1982 science fiction flick starring Jeff Bridges Tron, had something to do with MAp's "flexibility".

Shame, there was no flexibility in the "negotiations" with Macquarie, which led to MAp's independent directors striking a deal to buy out its former manager's rights for $345 million.

But at least the colour grey should help MAp with its next major debt refinancing deadline for Sydney Airport in 2011. To celebrate its new found independence and resilience MAp also managed to pass a resolution at its special general meeting granting a pay rise for its directors.

MAp's independent directors, including Trevor Gerber, will get a one-off $US125,000 payment on top of their $US140,000 fees for their hard work. Shareholders also passed a resolution to increase the board's remuneration pool by $150,000 to $850,000.

Office politics

Spotted at the MAp meeting were some operatives from another listed Macquarie fund.

One CBD spy noticed Macquarie Office Fund's chairman Stephen Girdis and chief operating officer Jill Rikard-Bell in a huddle, deep in conversation.

Maybe they were discussing ideas on how they can cut themselves free from their parent with a huge severance payment to Macquarie.

The fund, which half owns the Citigroup building in Sydney, reported an impressive $1.37 billion loss last financial year.

Bonus time

Trinity Group meanwhile has a few funny gags for its shareholders in its annual report.

The Queensland property company, which reported a $226 million loss last financial year, still managed to help out some staff members.

The company, which has already been castigated for paying $7 million in sign-on fees for two executives during the year, also managed to cough up some extra bonuses.
 
Trinity's head of funds management, David Asplin, was paid a $473,744 cash bonus and $73,500 share base payment on top of his $303,798 base pay.

Not bad from a company which has seen its sharemarket value slump from around $650 million to $29 million.

Trinity's head of property, Bruce Baker, who resigned last December, also scored a $250,000 bonus for five months work. F

ormer chief executive Ben McCarthy was not left out. He scored a $2.25 million bonus and a $1.05 million termination payment when he left the building last December.

Profits and loss

At least FKP was one property group to tweak on the idea that huge losses and share price slumps should not translate into executive bonuses.

Chief executive Peter Brown had to make do with his $1.5 million in base pay last financial year, forgoing the $2.3 million in bonuses and benefits he pocketed in the previous year.

His fellow executive team also had to make do without any bonus cheques. But Brown could be one of the few chief executives hanging out for a demotion.

The FKP boss is in a four-year contract which stipulates he is entitled to a severance of 24 months base pay if "he ceases to be the most senior executive officer of the parent entity".

The rumours the company could be taken over by its two main shareholders Mulpha and Stockland have so far failed to materialise.

Funny business

The comedian cum psychologist Pamela Stephenson-Connolly and Puberty Blues author Kathy Lette have proved to be reasonably cost-effective public company directors.

Stephenson-Connolly (wife of the Scottish comedian Billy) and Lette were paid $12,000 each for the honour of sitting on the board of the loss-making motivational speaking turned female financial adviser and financier Empowernet International.

The company, which used to flog the paraphernalia of the motivational speaker Anthony Robbins, was taken over (courtesy of a backdoor listing) by Superwoman Financial Solutions during the year.

Oddly, the company's former managing director, Michael Burnett, saw his remuneration for the year go from $306,851 to $462,729.

The company also replaced Robbins with Hawaiian-born Robert Kiyosaki as its headline motivator during the year "to an enormous and favourable response from our customers".

On his website, Kiyosaki blurts: "See, I am not just a company, I am an awakener. I am a teacher. I am a community builder ... an empowerer that has changed lives."

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

 

 

Insider

Edited by Jamie Freed

Hitting the phones: BBI activates Brookfield solution 

Babcock and Brown Infrastructure has activated what amounts to the largest of the market's recent recapitalisation deals.

Its $1.5 billion plan will bring in Brookfield Asset Management of Canada as a cornerstone investor and allow it to repay its corporate debt.

Macquarie Capital and Credit Suisse hit the phones yesterday to tap institutions like QIC and Colonial First State for an underwritten placement of $600 million or so, which will be matched by Brookfield.

Because of the risks involved with BBI, the investment banks were also looking for sub-underwriters.

The idea is to have a complete solution to its financing problems ready to present to the market by Monday, with its banking syndicates also signing the deal, as occurred recently with Elders and AWB.

As part of the arrangement, Brookfield will also take direct stakes in some of BBI's assets, including the Dalrymple Bay coal terminal, at an overall 13 per cent discount to their current book value.

The institutions and Brookfield will pay the same price for the shares issued in the transaction, which will require shareholder approval.

There were suggestions the issue price may be above the last closing price of 5.3c, based on a series of metrics other than current trading.

The reaction remains to be seen given that some fund managers have recently questioned the underlying quality of the assets.

Next stop, MIG

Macquarie Capital may have managed to extract $345 million in payment from MAp in return for cutting its management arrangement, but it could face an uphill battle to receive similar compensation from investors in Macquarie Infrastructure Group.

Despite some initial analyst projections that MIG could have to pay up to $800 million for the privilege of cutting management ties with Macquarie, there are some strong arguments in favour of it paying less than MAp.

For one, MIG does not appear to have the same degree of issues with potential debt refinancings triggered by a change of control. At MAp it was mooted to be as much as $4 billion.

Second, MIG itself is a mess compared with MAp and has plenty of underperforming, debt-filled assets.

In tandem with the independent directors' negotiations on internalisation, MIG's management team is also working on a split of the company into Good MIG and Bad MIG.

Grant Samuel, which advised MAp's independent directors on its internalisation plan, is advising MIG.

It might be difficult to achieve, but one suggestion is that MIG could spin off the good assets into a new entity with its own management, leaving the bad assets under Macquarie's management.

As one fund manager noted, the good assets, like its 407 toll road in Toronto, in effect manage themselves. And it would not necessarily be terrible if the bad assets were in the hands of investment bankers who could toy around with options.

But the management fees on the bad assets would be tiny, so clearly it would take a lot to convince Macquarie to agree to that arrangement without extracting some additional compensation.

Now that the MAp deal is done, Macquarie will have more time to focus on negotiations with MIG, and there is some hope an agreement can be nutted out by the end of the year.

Faux deadline

Fortescue Metals seems to have adopted some interesting negotiating tactics in relation to its planned $US6 billion financing deal.

It seems the September 30 deadline nominated by Fortescue, the point by which a debt deal would need to be signed or it would stop discounting its ore, was little more than an idle threat.

Perhaps it was trying to get the China Iron and Steel Association to pressure the financiers to complete a deal after the better part of a year of talks.

If so, it clearly did not work. Fortescue appears to have learnt its lesson and has not released a new "deadline" by which it intends to seal a financing deal.

In the meantime, it is likely to keep discounting its ore. Grant Samuel is advising Fortescue on the funding package and Deutsche Bank is advising the Chinese side.

Hardware sums

It takes economies of scale to run an effective "big box" retailing operation like Bunnings or Costco because of costs like procurement, distribution and national advertising.

And it is no secret that finding ideal sites for warehouse-like stores in Australia is not easy.

So it is notable that a Merrill Lynch analyst, David Errington, considers it "unfathomable" that Woolworths will meet its target of opening 150 large hardware stores within five years.

He also warns its joint venture with Lowes of the US may not assist with procurement as much as some think because about 40 per cent of products sold in Australian stores, including nursery, timber and garden supplies, tend to be sourced and produced domestically.

Errington's prediction of $344 million a year in pre-tax losses for Woolworths in hardware by 2015 adds fuel to his view that it should stop trying to expand in areas trickier than its core food and liquor business and start returning cash to shareholders.

However, that move would require management to swallow its pride, because the stock would be likely to lose its premium rating.

jfreed@smh.com.au

 

 

Briefs

Financial crisis

IMF loss estimate The International Monetary Fund estimates losses resulting from the global financial crisis stand at $US3.4 trillion for the 2007-10 period, despite some improvement in the world's banking system. Rising share prices have helped to trim losses in the past six months by an estimated $US600 billion, it says.

Uranium

BHP sale to China BHP Billiton has made its first shipment of uranium from its Olympic Dam mine in South Australia to un-named Chinese customers. Although the mine's prime revenue spinner is copper, BHP has to find a home for additional uranium that will come with substantial planned expansion.

Wealth

Perpetual purchase The wealth manager Perpetual has acquired the financial and tax advisory firm Grosvenor Financial Services for $19.6 million.

Approvals

Building surge Approvals figures foreshadow a surge in non-residential building activity, but the housing sector could flatten out and sap momentum in consumer spending. The value of building approvals in August was $8.63 billion, $3 billion or 54 per cent above the monthly average for the 2008-09 financial year.

Mop-up

Bid recommended The gold and base metals explorer Herald Resources has recommended that shareholders accept a mop-up bid by Calipso Investment. Calipso, a wholly owned subsidiary of the Indonesian coalminer PT Bumi Resources Tbk, already holds about 88 per cent of Herald and has long sought the rest. Herald shareholders have been offered 93c a share, up from an offer last month of 70c.

Gunns raising

Fully subscribed The woodchipper Gunns has announced that it has completed the retail component of its $145 million equity raising announced in August. Gunns said the retail component raised about $30 million and was fully subscribed.