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CBD

Birthday boy keeps his presence 

David Coe is in hot demand. So much so, that one company has refused to allow the former executive chairman of the failed Allco Finance Group to resign from its board.

Fronting the RHG annual meeting yesterday, Coe explained to shareholders that he had little choice but stay on at the company chaired by his old pal John Kinghorn.

"My view is very simple, I'm here because the board has asked me to be here," explained Coe, who would have struggled to get re-elected as a director yesterday if not for the Kinghorn family's 20 per cent holding.

Coe, who turned up to two of the four RHG board meetings last financial year, said he dumped his shares in the group because he "made a decision" to remove himself from all public company share registers.

"It was a personal decision and had nothing to do with the company," said Coe, who also celebrated his 55th birthday yesterday, a day after Babcock & Brown's former chief Phil Green celebrated the same milestone.

Kinghorn also showed himself as a champion of shareholder democracy. "Your board acts on behalf of all shareholders and not a vocal minority," he said, after two upstarts had tried and failed to get elected to the board.

As for the group's disastrous 2007 sharemarket listing, where Kinghorn cashed in $650 million, the chair spoke of his "personal pride as a builder of businesses" and stated his ambition to "build that share price back to $2.50". RHG shares closed at 70c.

Debt reckoning

The company secretary of the Octaviar Group, David Anderson, has attempted to settle any confusion among the imploded Gold Coast financial engineer's legion of creditors, who are owed around $1.7 billion.

The former chief bean counter of the company, who was paid $940,000 by MFS's former administrator and liquidator Deloitte in consultancy fees, has explained he was actually not involved in the decision making at the company over that time.

"At no time since 3 October 2008 have I been in control of the affairs of the company or had transparency as to the assets and liabilities of the company or the transactions undertaken," explained Anderson, whose firm Business Puzzle Solutions had been invoicing Deloitte for helping piece together the riddle that was MFS (aka Octaviar).

In a statement of affairs issued by Octaviar's new liquidator Bentleys Corporate Recovery, Anderson explained he was not involved in the payments made to one of the group's creditors, Fortress, by Deloitte.

Anderson also said he had no details of the claims from former and present Octaviar employees, "as not only would ... these [have] been subject to natural fluctuations since October 3, 2008, but I understand the voluntary administrators or deed administrators had settled with one or more past employees regarding their claims."

Index we trust

In a fortunate piece of timing, the Australian Securities Exchange and Standard & Poors have announced plans to launch an index for infrastructure companies.

The S&P/ASX Infrastructure Index will include 15 toll-road and utility companies from the top 300 stocks on the sharemarket.

The ASX's head of equity markets, Richard Murphy, said how the bourse and S&P "for the past five years ... have worked with a wide range of market stakeholders to ensure coverage exists for Australia's key industry sectors".

One wonders if Murphy is happy the ASX and S&P took five years to get around to establishing the index.

If the index started, say two years ago, it would have tracked the slump of debt-filled infrastructure heavyweights such as Babcock & Brown Power, Babcock & Brown Infrastructure, Challenger Infrastructure, Timbercorp Primary Infrastructure Fund, Asciano Group and BrisConnections.

The founding of the index also comes as Macquarie severs its ties with its infrastructure satellites.

Stan's new man

Kazakhstan has appointed the head of the gold explorer Central Asia Resources as its go-to man in Australia.

The Perth-domiciled company blurted to the market yesterday that it had hosted a visit from the Singapore-based Kazakh ambassador to Australia for four days, which culminated in its managing director, Jason Stirbinskis, being named as the country's honorary consul for Western Australia.

With the new Kazakh consulate based next door to Central Asia Resources' offices in West Perth, Stirbinskis said rather than stamp visa forms his job "was purely a strategic one".

The Central Asia Resources boss said he made his first visit to Kazakhstan only after he joined his Kazakh-focused company last year.

But he explained his Lithuanian heritage had come in handy. "That whole sort of Soviet culture and architecture and stuff is very familiar to me," reasoned Stirbinskis.

It is unclear if Stirbinskis will be required to spruik the new Kazakh capital, Astana. The Kazakh embassy has been heavily promoting the city as the place to be.

"The success of Astana is inspired by none other than President N. Nazarbayev – the author of its relocation and its main creator," explains ambassador Yerlan Baudarbek-Kozhatayev.

"Many projects were a realisation of his creative vision. In fact, the name Astana was the brainchild of the President," says his website.

Please explain 

You cannot say the Tax Office is rude in its correspondence to various individuals.

CBD has had a peek at a letter from the Deputy Tax Commissioner, Michael Cranston, to Paul Hogan from April 29, 2008, which was tendered as evidence in a hearing in the Federal Court.

"Under Australian law, residents for tax purposes generally need to declare and pay Australian tax on all income from sources within or outside Australia," Cranston's letter explained to Hogan.

"The ATO has increased its focus on Australian residents who may have undisclosed offshore assets or income or over-claimed deductions involving international transactions."
 
Cranston notes how in some cases Australian residents had transactions with offshore entities to avoid or evade tax in Australia.

He said the ATO had a taskforce called Project Wickenby.

"The ATO has information which suggests that you are, or have been, directly or indirectly involved in an arrangement utilising offshore structures and bank accounts."

He notes the Tax Office had started an audit of Hogan's affairs. "We invite you to take this opportunity to assess your tax affairs and review your records ... if you find that you have made any errors ... you should notify us."

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

 

Insider

Edited by Jamie Freed

Brave Fortescue's $6b ambitions

Fortescue Metals expects to triple its annual production after constructing two separate expansion projects nearly simultaneously at a cost of $6 billion – not to mention repaying $1.3 billion of principal on its existing debt in the same period.

Or at least, after scratching the surface, that's what Insider took away from the presentation by Fortescue's boss, Andrew Forrest, to the Sydney Mining Club yesterday, in which he gave potential timelines and capital cost estimates for its Solomon expansion in the western Pilbara for the first time.

Fortescue is always talking about growth – and never about standing still – because that helps it maintain a price-earnings ratio more than twice that of BHP Billiton and Rio Tinto.

As a bonus, promises of expansion prove a handy distraction from the fact that Fortescue has yet to meet its initial production targets after 18 months in operation.

The big news yesterday was that Fortescue expected it would cost $3.6 billion to build the first phase of its Solomon project in the western Pilbara, which would produce 60 million tonnes a year; and that Fortescue expected to approve the project next year or the year after.

That sounds great in theory. However, Fortescue has previously said it will approve a $2.5 billion expansion to 95 million tonnes of production as soon as an earlier expansion to 55 million tonnes is working like "clockwork".

The first 55 million tonnes is due to be completed by late next year, so presumably Fortescue is thinking it will approve the 18-month expansion to 95 million tonnes in 2011 or 2012.

Many are already sceptical Fortescue will be able to fund that primarily from internal cashflows now that its $US6 billion debt package with Chinese lenders has fallen over.

Credit Suisse thinks it is unlikely to complete that expansion until 2015.

Fortescue also has a substantial amount of principal payments on its junk bonds due during this period, including $312 million in 2011 and $950 million in 2013 – not to mention bond covenants that prohibit it taking out any more debt to fund the move to 95 million tonnes.

So the big question is: how will Fortescue construct and finance more than $6 billion of expansions effectively at the same time?

Forrest said yesterday Wall Street was happy to offer the B-rated company more junk bonds and has hinted the Chinese might help fund the Solomon project.

But with a balance sheet geared to the hilt and a record of constantly changing its mind about the best way to expand, it is only understandable that investors have a healthy level of scepticism.

Floats ahoy!

The last-minute failure of the $1 billion Investa Australia Office Fund float this week does not appear to have deterred other property groups from thinking about flogging their assets to the public.

There was speculation in the market yesterday that Becton Property Group was preparing for a $500 million float of its retirement assets that are co-owned by Oman Investment Fund, possibly with help from Macquarie Capital. Becton shares surged in the last hour or so of trading to close 22 per cent higher, at 10c, but a spokeswoman was unable to confirm or deny whether it was preparing a float.

If the speculation proves correct, it will be interesting to see how the offering is structured and priced.

Investa's attempted float failed after fund managers baulked at paying a price slightly higher than the net asset backing, given that most property funds are trading well below their asset backing.

Kathmandu will start trading today. The promoters hope it will top Myer's performance and hit the sharemarket at or above its $1.70 issue price.

Capital city
 
Despite the relative buoyancy of the Australian economy, the Australian Securities Exchange and local bond markets are not the only places to raise capital.

In fact more than $US100 billion ($107 billion) of equity has been raised on the London Stock Exchange and Alternative Investment Market so far this year, easily outstripping the amount raised domestically.

The head of business development for the LSE Group, Nick Langford, is visiting Sydney and Perth this week in an attempt to get Australian companies to consider London's capital markets.

About 31 Australian companies – particularly miners – have dual-listings on AIM, and six are on the main board of the LSE, including Centamin Egypt, which transferred from the AIM to the LSE on Friday with a market value of £1.3 billion ($2.3 billion).

The big four Australian banks and BHP Billiton have previously turned to London's large sterling-denominated debt market.

Over the past two years several Australian explorers have scrapped their secondary listings on AIM, citing issues such as lack of liquidity, because that market is dominated by institutional investors.

Langford counters that small companies are by nature rather illiquid, and liquidity also can bring severe volatility – not to mention that some small Australian companies with retail-dominated registers should appreciate the ability to bring institutions on to their registers via a listing in London.

It remains to be seen whether AIM will return to the heyday of 2005 and 2006 in the eyes of Australian miners, or if many will continue to prefer Canada for secondary listings.
 
But the fact that $US4.6 billion has been raised this year on AIM alone shows that the London market is a viable alternative to the local one for companies in search of capital.

jfreed@smh.com.au

 

 

Business Briefs

Interest rates

Another rise likely The creation of 24,500 jobs last month has increased the likelihood of another rise in the official cash rate. The dollar jumped nearly half a cent in expectation of the rate rise, and was trading at US93.45¢ last night. Although the unemployment figure rose from 5.7 per cent to 5.8 per cent on a seasonally adjusted basis, economists had been expecting a much lower number of new jobs.

Mining

Broken Hill goes on The Broken Hill mine keeps on giving after more than 124 years of production. Perilya, which acquired the zinc/lead/silver operation in 2002 on the basis that the deposit had another five years of reserves, has now extended the expected mine life by another 10 years.

Steel

BlueScope loss BlueScope Steel has reaffirmed its first-half forecast of a small net loss because the strong dollar and softer steel prices are largely offsetting higher sales volumes. Australia's largest steel maker told shareholders at its annual meeting that it does not expect to declare a dividend for the period.

Energy

Caltex in transit Caltex will embark on an aggressive mergers and acquisition strategy as it looks to expand its business and potentially move into areas such as biofuels and liquefied natural gas, chief executive Julian Segal said.

Drugs

Biota buys offshore Biota is hoping to greatly expand its pipeline of potentially life-saving drugs by agreeing to buy two overseas life sciences businesses. The biotechnology company, which developed the anti-flu drug Relenza, also confirmed it had the cash to deliver on a promised $20 million capital return to shareholders.

Finance

Protest vote More than a quarter of Challenger Financial Services' shareholders have voted against a remuneration report that seeks to boost the long-term incentives of senior executives. The protest vote reflects investor anger after a year in which the company's share price fell to 88c in March, the lowest since listing in 1997.