Ever since this circus started making headlines, I've been blogging this thing for fun. I have to confess I have no stake in any of this, except more amusement, which must make me a terrible rubbernecker in the world of high finance train-wrecks.
Here's the latest on the news vine.
BrisConnections, the Queensland toll-road builder that has tumbled 99.9% since its initial public offering in July, has requested its shares be halted from trading ahead of a potential approach to unit holders.
The company has received "material information from one of its underwriters regarding a possible approach", it said today in a statement.
Macquarie Group and Deutsche Bank are its underwriters.
Elizabeth Knight has this entry in the SMH.
Here is how the sides are lining up. Macquarie Bank is involved in almost every facet of this project; most importantly, it is a major lender. Its bridging loan will be repaid from the proceeds of the instalment receipts due from shareholders.
Deutsche Bank and Macquarie Bank have underwritten the instalment receipts, so if investors can't pay the money they owe (the first instalment is due later this week), then these two underwriters will need to make good on the shortfall.
Deutsche Bank would rather see BrisConnections wound up, because it could then avoid having to pay the shortfall on the instalment receipts.
Macquarie is happy enough to honour the underwriting agreement, because the larger institutional shareholders will be able to stump up the additional $2 liability attached to their shares and they will share any shortfall with Deutsche Bank. So on this deal the two underwriters are pitted against each other.
The third party in this is the Queensland Government. From a political perspective, it wants this project to be completed because it needs a new road from Brisbane Airport to the city, and it wants to employ local voters to build it.
It also has financial skin to lose as this project is a joint partnership, using taxpayer money.
On the other hand, the last thing the Premier, Anna Bligh, wants to deal with is lots of local shareholders being faced with debt collectors on their doorstep asking for money.
It was fortunate for Bligh that she went to the polls before this disaster blew up in her Government's face.
Nicholas Bolton may have been the catalyst for bringing this disaster into the public arena, but since this project began it has been an accident waiting to happen.
It's a classic highly-geared structure that should probably never have made it into the listed public arena.
The debt crisis that changed the feasibility of leveraged projects like this had already begun when it was listed on the Australian Stock Exchange. Getting equity funding from small shareholders who were then obliged to pay a call for further instalments was irresponsible. ASIC should have been looking at this at its conception, not its implosion.
There was no room in this project for excessive debt or rubbery forecasts for revenue and traffic use. But these are issues now coming into question.
It's funny how it's only now that the the foundations of the deal has been exposed as largely wanting that the public sphere has woken up to just how dodgy these public infrastructure deals put together by the Macquarie Bank actually are.
There are plenty of other tollways and motorways that Macquarie Bank has been shoving through development with these kinds of deals so there should be a greater lesson in it for governments. Of course the governments a re silent because it means they have to go back to the horrible prospect of actually doing these infrastructure developments from scratch by themselves, and weigh up the real needs of the population rather than throw up tollways every which way.Mac Bank shouldn't have been allowed to run loose with this stuff to begin with.
Of course the deafening silence you from the government is actually that because doing the right thing by the electorate and being accountable and making sense in how to spend public monies is hard work. Privatising deals and ripping off mom&dad retail investors, is capitalism in action and makes perfect sense, but BrisConnections shows it is an utter crock of a notion.
The 'Read'em Their Rights' Rule
It now falls incumbent upon Stockbrokers to warn investors about partially paid listed securities as a fall out of all this BrisConnetions mess. So even with an understanding that anything in the market must be caveat emptor, the ASX wants brokers to warn the small-timers.
The ASX said brokers will now be required to obtain from retail clients a signed agreement saying they are aware they have a responsibility to obtain and read a copy of a prospectus, product disclosure statement or information memorandum produced by the product issuer.
The rule will apply when small investors enter transactions to buy a partly paid security for the first time and take effect from May 1.
Client agreement rules of this kind already exist for complex products such as options, futures and warrants.
The Australian Securities and Investments Commission said the new rule for party paid securities is aimed at improving disclosure for retail investors, ensuring they are aware of potential liabilities when making such investments.
"ASIC and ASX have been in direct contact with several market participants to ensure that they have contacted their clients with current orders to buy partly paid Securities,and communicated their potential obligations,'' ASIC said in a statement.
The change to the ASX market rules was approved by federal superannuation and corporate law minister Senator Nick Sherry today.
"The government shares the concerns of ASIC and the ASX that retail investors have not fully understood their potential obligations with regard to partly paid securities,'' Senator Sherry said in a statement.
"A falling share market this year has meant that some securities that looked like a bargain actually had huge liabilities attached to them that were not understood by retail investors who purchased them.''
There are five partly paid securities listed on ASX that will be subject to the new rule.
I wonder how they'll make this work with internet share trading and the such.
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