Nick Bolton’s win in the Victorian Supreme Court means that BrisConnections will be wound up unless Macquarie can muster enough votes to block the wind-up motion.
Macquarie’s purchase of 8 per cent early this week makes it confident but professional litigators IMF are planning to try and prevent Macquarie voting (Will Macquarie get a vote, March 31). All this adds a new twist to the basic conundrum facing BrisConnections.
Earlier today this is how I set out the situation.
On Queensland ABC radio last night I was asked if there was any safe way out of an increasingly dangerous court situation for the infrastructure project that will link Brisbane City to the Airport which is being built by BrisConnections.
My answer was 'yes' – the Queensland government needs to put some money on the table. But the opportunity might not always be there because major forces are joining the legal battle along with those who smell a big profit.
Behind all the legal mumbo jumbo we have a stark situation. If the call on the shares proceeds then mums and dads stand to lose their houses. If the call does not proceed then the projects stops and may not be built for a long time.
What started out as an action involving Nick Bolton and small shareholders has been widened in the Queensland Court action where Deutsche Bank, the co-underwriter of the $390 million, publicly revealed its opposition to the call. We know that most of the overseas banks that have agreed to loan $2.9 billion to the project on the payment of this month’s call will do everything they can to get out of the commitment. The other joint call underwriter Macquarie is doing everything in its power, including initiating the Queensland court action to keep the project together.
Without undermining those actions by Macquarie, history tells us that when you have so many parties lining up against an action, the risks of an explosion are, multiplied. In my first article on this subject I suggested the Queensland government should put some money on the table to keep the deal in place (BrisConnections on a knife edge, March 30). Deutsche is facing a theoretical potential payment of $195 million as its share of the call if no one pays up.
It will not be easy to get people to willingly pay the call because the money looks almost certain to be lost. And there is a further call early in 2010 which might also have limited value. So Deutsche is looking at a $400 million black hole which might be reduced to say $300 million by forced call payments. Macquarie is in a similar situation except that it has loaned large sums in bridging finance which are repaid when the call triggers banks loans.
While substantial dollars have been invested in BrisConnections equity its market worth is minimal because of the decline in the value of the project and the losses on the interest rate swaps. Accordingly the overseas banks look very exposed. If it is proved that the shareholders have the power to stop the call and the Queensland government helps with bail-out then suddenly those units could be very valuable so we are seeing speculators with a history moving in (Banned US stock promoter behind stake in BrisConnections, March 31).
The Queensland government has the deal of a life-time but to secure that deal, in my view, it needs to improve the position of the parties. The government needs to take an equity position to relieve the mums and dads from their call and lower the exposure of the joint underwriters, particularly Deutsche. It might also look to improve the position of the banks. It will still be a great deal for Queensland.
If the Queensland government turn their back and simply rely on the courts then they may win. But the stakes become huge.
Macquarie’s purchase of 8 per cent early this week makes it confident but professional litigators IMF are planning to try and prevent Macquarie voting (Will Macquarie get a vote, March 31). All this adds a new twist to the basic conundrum facing BrisConnections.
Earlier today this is how I set out the situation.
On Queensland ABC radio last night I was asked if there was any safe way out of an increasingly dangerous court situation for the infrastructure project that will link Brisbane City to the Airport which is being built by BrisConnections.
My answer was 'yes' – the Queensland government needs to put some money on the table. But the opportunity might not always be there because major forces are joining the legal battle along with those who smell a big profit.
Behind all the legal mumbo jumbo we have a stark situation. If the call on the shares proceeds then mums and dads stand to lose their houses. If the call does not proceed then the projects stops and may not be built for a long time.
What started out as an action involving Nick Bolton and small shareholders has been widened in the Queensland Court action where Deutsche Bank, the co-underwriter of the $390 million, publicly revealed its opposition to the call. We know that most of the overseas banks that have agreed to loan $2.9 billion to the project on the payment of this month’s call will do everything they can to get out of the commitment. The other joint call underwriter Macquarie is doing everything in its power, including initiating the Queensland court action to keep the project together.
Without undermining those actions by Macquarie, history tells us that when you have so many parties lining up against an action, the risks of an explosion are, multiplied. In my first article on this subject I suggested the Queensland government should put some money on the table to keep the deal in place (BrisConnections on a knife edge, March 30). Deutsche is facing a theoretical potential payment of $195 million as its share of the call if no one pays up.
It will not be easy to get people to willingly pay the call because the money looks almost certain to be lost. And there is a further call early in 2010 which might also have limited value. So Deutsche is looking at a $400 million black hole which might be reduced to say $300 million by forced call payments. Macquarie is in a similar situation except that it has loaned large sums in bridging finance which are repaid when the call triggers banks loans.
While substantial dollars have been invested in BrisConnections equity its market worth is minimal because of the decline in the value of the project and the losses on the interest rate swaps. Accordingly the overseas banks look very exposed. If it is proved that the shareholders have the power to stop the call and the Queensland government helps with bail-out then suddenly those units could be very valuable so we are seeing speculators with a history moving in (Banned US stock promoter behind stake in BrisConnections, March 31).
The Queensland government has the deal of a life-time but to secure that deal, in my view, it needs to improve the position of the parties. The government needs to take an equity position to relieve the mums and dads from their call and lower the exposure of the joint underwriters, particularly Deutsche. It might also look to improve the position of the banks. It will still be a great deal for Queensland.
If the Queensland government turn their back and simply rely on the courts then they may win. But the stakes become huge.
