Executive Summary: October 06,2009
By Scott Rochfort | smh.com.au | 06 October
Unorthodox lending habits..Phil Sullivan's City Pacific.
CBD
McCabe scores a deal on way out
The debt-stricken Valad Property Group (Invalid Group) took advantage of the Labour Day holiday yesterday to announce the departure of another two directors, Kevin McCabe and Ian Robertson.
Apparently the resignations were all down to "the reduction in size and scale of the group that has occurred since 2008".
After all, Invalid's share price has collapsed 94 per cent since its peak.
Sadly, McCabe will no longer be around for the next annual meeting to explain the deal he wrapped up with Invalid (aka Vlad the Impaled) last week, which stemmed from its original $2 billion purchase of his Scarborough property group in Britain in 2007.
Invalid, now valued at about $225 million in the sharemarket, was forced last month to raise an additional $59.5 million from a one for four entitlement offer and institutional placement (at 10c a security).
This helped pay the final £29.5 million ($54 million) payment McCabe was entitled to as part of the original transaction.
The payment will cancel out an earlier proposal for the chairman of Sheffield United football club to take a 19.9 per cent equity stake in the cash-strapped company in lieu of a bulk of the cash payment.
When Invalid first announced its purchase of McCabe's company in 2007, it raised $1.2 billion in a capital raising at $1.92 a security.
At the time, Invalid's executive director Peter Hurley boasted: "While Scarborough has been tremendously successful to date under private ownership, it will now be able to pursue additional business opportunities with Valad's stronger balance sheet."
Aside from having to cough up more money to McCabe, Invalid has been forced to hive off the bulk of the assets acquired from Scarborough into a joint venture with its lender the Bank of Scotland.
Obviously going by yesterday's announcement, McCabe and his former Bank of Scotland comrade Robertson both reckon Invalid has a bright future.
All at sea
City Pacific, the former Phil Sullivan-headed Gold Coast property finance company that has left thousands of investors in a financial hole, appears to have had some unorthodox lending habits.
The collapsed $650 million Martha Cove marina development in Victoria operated by City Pacific not only used to lend money back to some of its own related entities but companies set up by playwrights who argue for the Palestinian cause.
A search of the receiver's report on Marina Cove Pty Ltd lodged by PPB last week shows the development was owed $2.5 million by Crescent Moon Yellow Star Pty Ltd, a company founded by Henry di Suvero.
The former lawyer authored a play by the same name that was staged at Belvoir Street Theatre in Surry Hills in 2005.
It posed the question: "Why do the Palestinians have to pay for the Holocaust?" Di Suvero explained to CBD yesterday that he set up the company as a "vehicle for raising money for my other plays".
But when the plays failed to bring enough money, he said he handed control of the company to his friend and the former high flying 1980s healthcare millionaire Dr Ian McGoldrick.
"It's nothing to do with playwriting today," di Suvero said. The company, named after a play that features the former Israeli prime minister Ariel Sharon paying a visit to hell, spent its final days in the property development game.
Under McGoldrick's ownership the company, now in receivership, took the loans out over several waterfront lots in the marina. Going by the number of corporate undertakers divvying up the marina development, the site almost resembles the disputed lands in Israel and the Palestinian Territories.
PPB was appointed receiver to the portion of the development which owed $70 million to the Commonwealth Bank and now plans to sell off the 250 lots under its control on an individual basis.
The former City Pacific managed First Mortgage Fund, which is owed more than $110 million by the development, has appointed McGrathNicol as receivers over the portion of the development which owes it money, while Westpac has appointed Korda Mentha to look after the lots of land formerly owned by the City Pacific part-owned property developer Indigo.
Sinking feeling
Aside from companies named after plays on the Israeli-Palestinian situation, another debtor of the marina development is Macquarie's main man in Melbourne, Simon McKeon and his wife Amanda Jane.
The keen speed sailor, Macquarie Capital Advisers executive chairman and Takeover Panels president is listed as owing $72,249.30.
It seems McKeon never got around to settling into the marina. Looks like he will have to hold onto his membership at the McCrae Yacht Club down the road.
The receiver, PPB's Ian Carson, also seems mindful that residents in the half-completed marina are not too happy.
He has listed one contingent liability as a "potential" damages claim from home owners in the marina.
One contingent asset is a damages claim against City Pacific, which is already in liquidation, and the sale of "surplus landfill". Any buyers?
Party line
The budding federal MP for Bradfield, Paul Fletcher, could expect an interesting first question time in Parliament if he wins the by-election for Brendan Nelson's old seat.
Given the Opposition's moans about the alleged loss of value to Telstra shareholders from the plans of the Federal Communications Minister, Stephen "Hugo Chavez" Conroy, to force a structural separation of the telco, Fletcher could struggle to stick to the Liberal Party song sheet.
Aside from being the former policy head for the Singapore-controlled Optus, Fletcher is a one-time sparring partner of Telstra's former mouthpiece Phil Burgess.
Fletcher has also held some strong views on structural separation for some time – views that could even appear to be stronger than Conroy's.
In the book he penned on the Sol Trujillo years at Telstra, Fletcher notes his "fundamental argument is that we need to get the market structure right first".
"In an ideal world there would be several different companies each owing a fully independent broadband network and competing vigorously with each other," says the book Wired Brown Land?
Fletcher's tome also describes Burgess as a "rotund, bellicose figure with a florid turn of phrase and a knack for generating media coverage".
Insider
Edited by Jamie Freed
Standard Chartered's loss might be ANX's gain
The reported breakdown in talks between Royal Bank of Scotland and Standard Chartered over the sale of RBS assets in India, China and Malaysia could represent another opportunity for ANZ to expand its business in Asia.
ANZ recently spent $687 million on RBS’s assets in Taiwan, Singapore, Indonesia, Hong Kong and elsewhere. It has Tier 1 ratio of 9.5 per cent, even after its $1.8 billion purchase of the 51 per cent of ING’s Australian wealth management business it did not already own.
RBS’s Indian, Chinese and Malaysian businesses were offered as a separate package, but now that Standard Chartered has baulked at paying more than $US200 million for the bunch, it is possible that RBS could sell the divisions on an individual basis.
That would suit ANZ, which was interested in the Chinese assets in particular, but only at the right price.
ANZ’s chief executive, Mike Smith, was in China last week, and the bank has signed an agreement with the China Development Bank to act as its agent in Australia. ANZ wants to become one of the top four foreign banks in greater China and India, and to be a top four bank in Malaysia, Vietnam and Indonesia.
But that doesn’t mean it will necessarily want to bid for the RBS assets in India and Malaysia. The purchase of RBS’s Indian assets requires an Indian banking licence.
ANZ has applied for one, but it has not yet been granted, and so it is unlikely to want the Indian business unless the sales process drags out until after it receives the licence.
Among the Australian banks, Commonwealth Bank has an Indian banking licence and therefore would be an eligible bidder.
An ANZ bid for the Malaysian assets would be complicated by the fact that it has a joint venture with AmBank in that market.
Elsewhere in international banking, there are reports that Macquarie Capital is the only bidder left standing in the race to buy the investment banking operations of Sal Oppenheim after Mediobanca and Barclays decided not to lodge final offers.
Sal Oppenheim, which is unlisted, has its headquarters in Luxembourg but was founded and operates mostly in Germany, where it is a second-tier player.
Deutsche Bank is said to be targeting the private banking division.
Coal to India
The coal developer Rocklands Richfield has managed to attract a second takeover bid, just days after its largest shareholder, Benny Wu, sold a 9.9 per cent stake in the miner to the first bidder, India’s Jindal Steel and Power.
Rocklands is expected to provide the market with more details about the new offer today after some board members discussed the proposal – said to be superior to the Jindal bid – with the suitor in Hong Kong over the weekend.
Insider hears that like Jindal, the mystery suitor is an Indian company. Before accepting the $146 million bid from Jindal, Rocklands had been approached by a small number of overseas suitors and signed confidentiality agreements with some of them.
The company owns a coke plant in China and has defined 880 million tonnes of inferred resources of coking coal in the Bowen Basin.
It is at least three years away from developing a mine. India has enough iron ore to meet its domestic needs and to export some to the Chinese spot market, but it is short of coking coal and is therefore hunting for mines in Australia. Jindal’s bid is worth 42c a share, and there is a break fee of $1.46 million payable if it does not proceed.
Wu will prove the deciding factor as to which company wins control, because he owns 60 per cent of the company even after the sale of part of his stake to Jindal. Rocklands shares last traded at 35c.
Deal on hold
The long-suffering shareholders and hybrid holders in Babcock and Brown Infrastructure will have to wait at least another day before Brookfield Asset Management’s recapitalisation plan is presented to the market.
The public holiday in Sydney yesterday did not assist the advisers with obtaining final commitments from institutional investors and the completion of reams of documentation surrounding the raising and asset sales.
The announcement is expected tomorrow at the earliest.
Briefs
Iron ore
Flinders and Rio discuss gate sales The iron ore explorer Flinders Mines is in early talks with Rio Tinto about potential mine gate sales from its Pilbara project. Access to transport infrastructure is a big challenge for the project, near Rio Tinto's Tom Price mine in the Hamersley Ranges.
Coal
India goes shopping Coal India, the nation's monopoly producer, hopes to buy a mine in Australia this financial year and has hired Royal Bank of Canada to identify a potential site. The chairman, Partha Bhattacharyya, said yesterday it was also looking at mines in the US, South Africa and Indonesia.
Gambling
Aristocrat upgrade Shares in Aristocrat Leisure rose 38c to $5.55, their highest in almost a year, after analysts at JP Morgan upgraded the stock to a "buy". Orders for replacement poker machines from North American casinos and Australian pubs were expected to revive sales volumes next year.
Gold
Norton interest Shares in Norton Gold Fields rose more than 15 per cent to 26.5c yesterday after the miner said it had been approached by investors interested in its projects. Norton is one of the largest Australian-owned gold producers on the exchange.
Mineral sands
Mindarie on hold Australian Zircon has placed its Mindarie project in South Australia on care and maintenance, and talks with its bankers about financing options are continuing. Trading in the mineral sands explorer's shares have been suspended since August 20. DAIRY Receiver called in Crafar Farms, New Zealand's largest family owned dairy business, has been placed in receivership by its lenders. KordaMentha has been appointed receiver to four businesses that operate 20 dairy farms.
Biotech
HealthLinx backer HealthLinx has won backing from a New York company for the commercialisation of its OvPlex ovarian cancer diagnostic technology.
First published by Smh.com.au on October 06 2009
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