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Riding high ... Forrest says he has never felt more comfortable.Illustration: John Shakespeare.

CBD

Court refuses to believe George's Clayton's defence

Peter George, the former owner of Elderslie Finance Corporation, has been left with few assets since his financial firm collapsed.

But this failed to stop the District Court at the Downing Centre last week ordering George to cough up $272,703.48 to his former law firm Clayton Utz in fees racked up from a previous legal battle.

George thought Elderslie Finance, which owes about $200 million to creditors, would cover his legal costs.

He also told the court last week that he could not even afford a lawyer. But Clayton Utz told the court that George's wife owned a 25-metre $3 million yacht called The Sirius and a twin-engine aircraft.

Clayton Utz won out. Jane George, according to company documents, took ownership of the 1993 Beech 58 Baron aircraft (worth about $600,000) when her private company assumed control of the firm Aircraft Charters Pty Ltd from Elderslie Finance in 2005.

Peter George's other half is also listed as the owner of the couple's apartment in Neutral Bay, bought for $1.5 million in 1999.

Jane's boat shares the same name as the flagship of the First Fleet that ended up sinking off Norfolk Island in 1790.

Bitter irony

One of Elderslie's final offerings to investors was when it tried to raise $60 million in secured debentures early last year.

Its then chairman, the former Liberal leader John Hewson, reassured investors in the prospectus that Elderslie had not been directly affected by the subprime meltdown.

"I am glad to say that Elderslie has no direct exposure to this market," he said. "Ironically, much of our leasing business tends to be countercyclical, performing better in more difficult market circumstances, thereby giving us the capacity to offer even more attractive interest rates to our debenture holders."

The company collapsed several months later. One of the firm's biggest debtors happened to be a firm owned by Peter George called Australian Integrated Finance. George is also a former employee of the property developer Bob Ell's Leda Holdings.

Exit the dragon

You could never knock the Fortescue boss Andrew "Twiggy" Forrest for being a pessimistic type.

"In all my time at Fortescue, since starting this company, I have never felt more comfortable or more excited about its future than I do today," he told a media briefing yesterday.

Not bad for someone who told the same briefing that his company's much-awaited plans to borrow $6 billion from the Chinese to fund its expansion had been put on hold.
 
"We have growing confidence in our own ability to self-finance," said an unperturbed Forrest, who has seen the value of his stake in the company dip about $9 billion.

It just seems the Chinese were not able to come up with a funding package to his liking. "The two organisations agreed in the end not to make a meeting of minds," he explained in relation to the recent financing talks.

"We have an enormous amount of support from China." It seems Fortescue has relationships with lenders that most other large companies would envy.

"China and other countries have been keen to implement financing discussions with FMG," Forrest said. "We are not in a hurry."

In the group's annual report published yesterday Forrest said: "Fortescue has been firmly focused on embedding the value of our strong family culture, enthusiasm, innovation, mateship and frugality."

Swan's kool aid

The federal Treasurer, Wayne Swan, now knows an alternative place to get some easy questions, if his colleagues ever fail to ask the right Dorothy Dixers in question time.

Swan was pampered with some cottony questions when he became the first federal treasurer in six years to attend the Australian Business Economists luncheon at the Wentworth Hotel yesterday.

"First of all can I congratulate you on that fiscal stimulus?" said the NAB economist Rob Henderson, in a full-frontal attack on Swan.

"We thought you'd done a fantastic job," said Henderson, of Swan's budget-keeping skills. There was no let up.

The chairman of Australian Business Economists, Stephen Halmarick, of Colonial First Stater, asked Swan what it felt like when he decided on the bank deposit guarantee when financial markets were in free-fall last year.

"What was the feeling like in the room? What was the vibe thatwas going on at the time?"Halmarick probed.

Then someone from Macquarie Funds Group showed no reprieve for the Treasurer: "I just wonder what your government thinks are the big challenges for the period ahead?"

For some reason the nation's former head bean counter Peter Costello stopped attending Australian Business Economists luncheons after 2003.

Fee factory

The chairman of Lend Lease, David Crawford, had to make do with a modest 10 per cent rise in his fees for the year to $714,000.

This is better than the $474,173 he scored from chairing the booze maker Foster's Group, which has a market capitalisation more than double that of Lend Lease.

Crawford also pocketed $US271,589 from sitting on the BHP Billiton board. The chief executive of Lend Lease, Steve McCann, also did all right.

After taking on the top job halfway through the financial year, McCann scored a $968,000 cash incentive and $1.76 million retention payment on top of his $1.3 million salary.

Bearing grudges

The battle of the two Cons who run the road sign companies called Traffic has resumed. Con Scrinis, the Melbourne Greek business identity trying to backdoor list his firm Traffic Group, has again taken aim at Con Liosatos, his former partner and rival, at Traffic Technologies.

The first Con, who is trying to retake board control of Traffic Technologies, noted how the company had been wasting money on consultants and a public relations firm.

"The board seems fixated on blaming everyone else for the mess," the first Con said, in a statement issued by his own public relations firm yesterday.

After an investor roadshow of several pubs across Australia, the first Con has still been able to raise $5 million to backdoor list his Traffic Group into the former fish farmer Western Kingfish.

He failed to mention in his media release yesterday that he was in talks with the second Con at Traffic Technologies early this year to buy their road sign business.

Got a tip? Use our online tips box or email srochfort@smh.com.au

Insider

Edited by Jamie Freed

A stunning jewel in Babcock's portfolio

It often pays to read the fine print.

But with the reams of documentation surrounding Babcock & Brown Infrastructure's complex $1.8 billion recapitalisation deal, it is perhaps not surprising that some of the more interesting details have been lost amid the clutter.

The jewel in the crown of the BBI portfolio is its full ownership of Dalrymple Bay coal port, Queensland, which has an enterprise value of about $2.25 billion.

It has been well-publicised that BBI will sell a 49.9 per cent stake in that asset to its new cornerstone investor, Canada's Brookfield Asset Management, for $295 million as part of the recapitalisation deal.

But the fine print shows that starting on the fifth anniversary of the deal, Brookfield will have an annual right to demand the sale of Dalrymple Bay at a price specified by Brookfield.

BBI will have a period in which to decide whether to buy out Brookfield's interest at the same price. If BBI chooses not to acquire the 49.9 per cent stake, Brookfield will be allowed to sell the entire port to a third party at no less than the price it had specified.

BBI will be able to buy out Brookfield's stake by issuing shares to the Canadian company at 95 per cent of their trading price at the time.

That would serve to greatly increase Brookfield's direct stake in BBI from the 35 per cent to 40 per cent expected after the recapitalisation deal is done.

Those close to the deal argue that the arrangement will ensure BBI recoups full value for Dalrymple Bay in the future.

But others pondering an investment in the recapitalised company based on its growth prospects may not be thrilled with the idea that BBI's continuing ownership of its flagship asset could be in part dependent on Brookfield.

That would be especially true if BBI could not grant Brookfield a second ranking security over Dalrymple Bay's equity and debt by February 2013.

In that case, Brookfield can demand that BBI sell its 50.1 per cent interest in Dalrymple Bay at a price specified by the cornerstone investor and would not have an option to buy Brookfield's 49.9 per cent stake.

The independent expert Grant Samuel considered the Dalrymple arrangements "on balance disadvantageous" to BBI, but overall they were deemed "no less advantageous" than those that would apply in a sale to an arm's length third party.

BHP'S big bid

BHP Billiton is understood to be the mystery miner negotiating with United Minerals about a possible change-of-control transaction that would trump a recently planned placement to China Railway Materials.

BHP, believed to be advised by Gresham, was the original owner of United's Railway project, but back in 2003 it was required to drop 264 square kilometres off its tenements.

United eventually picked up the area, making it the first junior since 1964 to hold the ground. United recently noted its leases were in the "geographical centre" of the production plans of the proposed BHP-Rio Tinto iron ore joint venture, making it valuable real estate.

A deal would not mark the first time BHP has paid big money to buy back its old ground.

Last year it bought the New Saraji coal project in Queensland from New Hope for $US2.4 billion in partnership with Mitsubishi, after having relinquished the tenements in 2002.

Fairfax truce

As Fairfax Media's directors head into their board meeting in Wellington today following last month's damaging rift, all expectations are they will appoint the deputy chairman Roger Corbett as new chairman-elect to replace Ron Walker, who chairs the meeting for a final time.

The uneasy truce has been achieved after a fortnight of rallying major shareholders, and two private meetings of Corbett with John B. Fairfax and his son Nick of Marinya Media, late last week.

Details of those meetings have not been disclosed but some large shareholders said yesterday their money was on the Fairfaxes supporting Corbett's appointment to signal board unity, letting the company focus again on the structural issues facing the industry and preparing a search for directors with new-media experience.

One key investor said it was vital that a board led by Corbett rallied behind the management team under Brian McCarthy to make sure there were no disruptions.

Elsewhere, Macquarie Media shares rallied 19 per cent as speculation intensified that it was about to make public a plan to internalise the fund's management.

Breville check 

The competition regulator has begun an informal review into GUD Holding's proposed $300 million acquisition of rival Breville Group.

The Australian Consumer and Competition Commission wrote to interested parties on Friday – the same day the deal was made public – and noted it had considered separate product markets for each category of small electrical appliance.

As part of the review, the ACCC wants to find out whether GUD and Breville are considered each other's closest competitors and if house-branded appliances could be viable competitors.

GUD said last week that the combined group would hold about 30 per cent of the market – and noted the competition from imports – although Goldman Sachs JBWere estimated the market share would be more than 50 per cent.

Meanwhile, Solomon Lew and his Premier Investments, which combined own 30.5 per cent of Breville, are expected to take a close look at the bidder's statement before pondering their next move.

jfreed@smh.com.au

Briefs

Printing

PMP's $50m Sensis deal The printing and distribution company PMP Limited says it has secured a contract to print the Yellow Pages and White Pages directories for the Telstra unit Sensis. The seven-year agreement was worth an estimated $50 million in revenue in the first year, said PMP, which lost its chief executive Brian Evans, its big customer Coles and $27.2 million last financial year after admitting to having misled some customers over its junk mail delivery.

Bank bonuses

Citigroup avoids clash Citigroup is letting go of its $US100 million man, Andrew Hall, and the lucrative energy trading business he ran, after Washington threatened a showdown over his nine-figure bonus. The bank handed its energy trading operation Phibro to Occidental Petroleum last week, averting one of the most closely watched clashes between a Wall Street firm and the Obama Administration over executive pay. The bonuses have also been a political nightmare for Citigroup, in which the government took a nearly 34 per cent stake after injecting $US45 billion taxpayer money.

Retail

Woolies offer extended Woolworths has extended the deadline in its takeover offer for the local hardware group Danks Holdings from October 20 to November 19. Carboxy Pty, a Woolworths subsidiary being used to grab control of Danks, has raised its stake in Danks to 89.16 per cent. In August Woolworths began a $87.6 million takeover bid for Danks as part of its push into the Australian hardware industry that included a joint venture with the US hardware giant Lowe's.

Iron ore

China's import boom Iron ore imports by China, the world's largest buyer, have exceeded real demand by 50 million metric tonnes this year, the country's steel association says. The recent gains in spot iron ore prices were "speculative," said Luo Bingsheng, vice-chairman of the China Iron & Steel Association.