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CBD

Be afraid – you're in the 'New Normal'


Westpac chief executive Gail Kelly helped push along a new term for art historians and philosophers to ponder yesterday by characterising the current age as the New Normal.

"We're moving into a new order, a New Normal," mused Kelly, when she presented her bank's annual $3.45 billion net profit at its main George Street branch.

Though the management consultancy firm McKinsey already appears to have been using the New Normal term for months, along with Microsoft's abnormal chief executive Steve Ballmer, Kelly painted a picture of the new reality we live in following the collapse of Lehman Brothers.

Apparently in the New Normal, banks are victims too. "The cost of debt is going to rise for all of us in the New Normal," Kelly said.

Explaining how the bank was paying more in obtaining wholesale debt and deposits that it could lend on to home owners, Kelly said it all "goes back to the New Normal".

In the New Normal, Kelly tried to show the bank's humane side by giving her presentation in Westpac's main George Street branch, the site of its original head office.

"A place with a bit more heart," was how she described the venue.

In the New Normal, Kelly appears to have put back on her dragon outfit, two years after leaving St George Bank.

"St George is stronger than ever," she boasted of the bank now owned by Westpac. The former St George chief executive noted there was an "enormous amount of best practice sharing" between Westpac and the bank it took over a year ago.

It is unclear if this just related to conversations Kelly held with herself in front of her mirror.

Kelly even seemed to give herself a slap on the back by crediting St George's success partly on the "Big enough; Small enough" strategy it adopted in 2003, when she happened to be its chief executive.

Scarcity rules

Microsoft boss Steve Ballmer was recognised for his entry into the New Normal world in September, when he sent an email mentioning the term seven times.

"Today, people borrow less, save more, and spend with much greater caution," he said. "This is the New Normal and it will be with us for some time ... ," Ballmer used the term again in a speech in Korea this week.

"The New Normal will be a more scarce environment than we saw a year, two years, three years ago," he told the audience.

'Axe' in charge 

Max "the Axe" Moore-Wilton's skills as an airport landlord and car park fee collector finally appear to have gained worldwide recognition.

Moore-Wilton has been elected as the voice for 1670 airports around the world in his new role as the chairman of the industry lobby group, Airports Council International.

It seems John Howard's former right-hand bureaucrat managed to charm enough of his fellow ACI directors who attended the group's three-day annual meeting which finished in Kuala Lumpur yesterday.

"Airports encompass the whole issue of relationships with government," explained Moore-Wilton to CBD, on his role as a former public servant and now airport advocate.

"It's just that my peers think I can handle this job as well as the other things that I do."

Seems like Moore-Wilton has refined his language in the three years since he resigned as the chief executive of Sydney Airport (but remained its chairman).

He no longer seems to refer to politicians as "galoots" or the chairmen of certain airlines as cheap populists.

In a press release sent out by ACI about the conference in KL, Moore-Wilton said: "I believe this is an excellent moment for us to discuss how we can stay above the turbulence and sustain the business excellence. I believe our delegates will treasure this opportunity to exchange views and network with industry colleagues."

He will be the chairman of the group for two years and retain his role as the chairman of Sydney and MAp Airports. One of Moore-Wilton's biggest opponents over the years (in negotiating landing fees) was very diplomatic.

"I am sure that the views of the 1600-odd airports will be made," said the Board of Airline Representatives executive director, Warren Bennett, who haggles landing fees on behalf of the bulk of foreign airlines servicing Sydney Airport.

"His qualities are communicating and networking," Bennett said.

Burgess lauded
 
Telstra's former government-basher and mouthpiece Phil Burgess has has been recognised in his homeland for his freedom fighting efforts in Australia.

One of The Wall Street Journal's senior columnists, Holman Jenkins jnr, has argued the former Telstra chief executive Sol Trujillo and Burgess had been "roundly vilified" by the Australian media for doing their best for the telco.

"Their sin was to carry out the mission given them," noted Jenkins in the paper, arguing their brief was to help the company's transition into becoming a fully privatised entity.

It seems, according to Jenkins, that a lot of Australians have not acknowledged the efforts Burgess has made – even after leaving Telstra – in helping their tiny country.

Noting Burgess's campaign to fight against the Communist Rudd regime's attempts to build a national broadband network, the opinion piece noted how the Government wanted to seize Telstra's "wholesale network partly to eliminate competition".

No doubt Telstra's competitors may beg to differ.

"Mr Burgess no longer lives in Australia and no longer works for Telstra, and he doesn't have the appreciation of most of the Australian media – but, by keeping up the fight, he just might be helping Australians avoid a terrible mistake," blurted the opinion piece.

Jenkins said the NBN was a "tremendously awful idea".

We know better

Oddly, Telstra's new chairwoman, Catherine Livingstone, and chief executive, David Thodey, failed to make any tribute to their forebears in their addresses at the telco's annual meeting yesterday.

The only matter relating to Trujillo that was bought up by Livingstone in her address was the former chief executive's $3 million termination payment.

Livingstone even said Telstra supported the NBN vision. "It could change the way we live and work in ways we cannot now imagine – if we get it right," Livingstone told shareholders.
 
But she is Australian. What would she know?

Flying scared

The head salesman of Airbus, John Leahy, was in Sydney yesterday to help provide some feedback on Channel Seven's new Sunday Night current affairs program.

In response to the recent program on the dangers of computerised cockpits in Airbus jets, Leahy said: "I think it was pretty silly.

If that wasn't sensationalist I don't know what is." The program explored why some pilots nicknamed Airbus, "Scarebus".
 
Got a tip? email srochfort@smh.com.au

 

Insider

 
By Jamie freed

Numbers thinned out for Lotteries


The field of buyers for NSW Lotteries has been narrowed to a handful. Among those believed to be on the shortlist is a consortium that counts the former Tattersalls boss Duncan Fischer as a member.

Fischer's group will be competing against Tatts Group, which is headed by the former UNiTAB boss Dick McIlwain.

When Tattersalls and UNiTAB merged to form Tatts in 2006, Fischer was initially set to take the top job but was forced aside after institutions preferred McIlwain to be at the helm.

There is speculation that Fischer's consortium is backed by newsagents and private equity. In any case, the newsagents are still believed to be involved in the sales process at this stage, although many consider Tatts the frontrunner because it has the ability to extract the most cost savings.

The shortlisted bidders have been invited to undertake due diligence, including entry to a data room and access to presentations by the management team.

Formal suitability checks have been started as part of the auction process being run by Goldman Sachs JBWere.

The final bids are not expected to be received until February, and the winner is therefore likely to be announced late that month or in March.

The State Government will no doubt be hopeful of receiving the final payment by June 30.

On the outside

The external management model may have collapsed in the case of many of Macquarie Capital's listed satellites, but that has not stopped Morgan Stanley from pursuing the structure for its $1 billion Investa Australian Office Fund (IAOF) float.

And who should Morgan Stanley, the owner of Investa, turn to for help on the intricacies of managing the offering?

None other than Macquarie, which in return will split the $36.1 million fees from the raising.

The product disclosure statement for the IAOF float will be published next week, but the lead managers have been marketing the offering to institutions.

Insider has seen a copy of the presentation made to fund managers, which listed the base fees and performance fees payable to the responsible entity, Investa Funds Management, and the manager, Investa Properties.

Not to mention leasing fees, property management fees, asset management fees, etc.

The externally managed model is no longer in style for investment vehicles in most sectors, but it remains the dominant model in the property sector, with a few notable exceptions like Westfield and GPT.

However, over time the externally managed model could prove just as unpopular in property as in industries like infrastructure and media.

A Goldman Sachs JBWere analyst, Peter Zuk, recently said investors were increasingly in favour of simpler structures and that the fee schedule for the float was likely to be examined with a fine-tooth comb.

For the IAOF float, the management rights are for five years, with a five-year option, and a portion of the base fees will be deferred over the next four years.

However, Morgan Stanley has taken into account the possibility that investors will want to dump the manager at some point.

In that case, all deferred fees will be immediately payable.

In the meantime, a Brookfield Asset Management satellite, Brookfield Infrastructure Partners, has raised more than $C616 million ($640 million) with help from its parent to partially fund the proposed recapitalisation of Babcock and Brown Infrastructure.

First steps

In what could be a sign of coming corporate bond issues, Origin Energy and Dexus Property have recently sought new credit ratings.

The moves come as companies continue to diversify their sources of debt funding away from the traditional bank facilities that caused so much grief to many during the financial crisis.

For Origin there has been a lot of focus on the possibility of an equity raising, but it could also use debt to help fund its growth plans, such as buying NSW electricity assets and building a liquefied natural gas project in Queensland.

Yesterday Woodside Petroleum tapped the US 144a market when it raised $US700 million ($777 million) of five-year bonds with a coupon of 4.5 per cent.

The bond raising, along with the $712.5 million sale of its stake in the Otway gas project to Origin this week, will help it repay short-term debt and fund its huge capital spending program.

Woodside, unlike its rivals Santos and Oil Search, has so far refused to raise equity to fund its ambitious liquefied natural gas expansion plans.

Woodside typically raises funds in the US market because its products are priced in US dollars. Coca-Cola Amatil is another that recently turned to the US market to raise $US400 million to refinance debt.

Its five-year notes carried a coupon of 3.25 per cent.

Companies like Woodside and Amatil that are familiar to the US market may get better terms there, but debt specialists say most Australian companies will do better locally. Wesfarmers, Leighton and Downer EDI have all raised money locally in recent months. An increase in equity raisings and corporate bonds means fewer companies are turning to the big banks for funding. Yesterday Westpac said its institutional lending had fallen last year and was not expected to rise this year. NAB expects a decline this year. But ANZ, which increased its institutional lending by 0.6 per cent last year while its rivals pulled back, remains more optimistic.

jfreed@smh.com.au

 

Briefs

 
Hardware

Danks takeover Danks says it is closer to being taken over by a hardware joint venture between Woolworths and Lowes after the minimum acceptance conditions were met. The next hurdle will be approval from the Australian Competition and Consumer Commission. A decision is expected next week.

Publishing

Fee for online West Australian Newspapers may consider following News Corp down the path of charging for online news content, its chairman, Kerry Stokes, told the company's annual meeting.

Banking

Liddy's rewards Bank of Queensland's managing director, David Liddy, earned $2.23 million in 2009, up from $1.19 million the previous year, according to the annual report. The bank's cash earnings for the 12 months to August 31 were $187.4 million, up 21 per cent.

Cosmetics

Staying young Biotech company Phosphagenics announced that the luxury beauty company, Le Metier de Beaute, of New York, will launch its cosmetic treatment products, Peau de Vierge Anti-Aging Collection, exclusively with Phosphagenics' TPM delivery technology across the US this month.

Property

No Multiplex deal The Grocon-Oaktree consortium will walk away from the battle for control of the Multiplex Prime Property Fund. Investors will now vote on the refinancing offer by Multiplex's management. The fund needs cash before November 16 to repay bankers or risk breaking debt covenants.

Tax liability

Kiwi kerfuffle Westpac New Zealand has been accused of issuing an almost meaningless set of financial statements for the year to September. If its $NZ918 million tax liability awarded by a court was included in the retail business, said banking expert David Tripe, it would have posted a $NZ682 million loss for the year.