ANZ finds out fertilisers are explosive

If you Google the words 'process server', you may find an advertisement touting the service "Call Gotcha We 'Get-em"'.

If you Google the words 'process server', you may find an advertisement touting the service "Call Gotcha We 'Get-em"'.

The traditional notion of the process server conjures up images of a private investigator waiting to pounce on an unsuspecting scallywag. Once the scallywag leaves his house, the server springs out from behind a tree, confronts the scallywag with an invitation to court and says: "You're served!"

It must have been with high indignation, then, that the venerable directors of the ANZ Banking Group were personally served with subpoenas at the bank's Gothic Queen Street headquarters and around the leafier suburbs of Melbourne the other day.

The subpoenas compel them to produce documents in a court case brought by the Indian millionaires Pankaj and Radhika Oswal. The Oswals are the entrepreneurs behind the $3 billion Burrup fertiliser business in Western Australia, which went into receivership in December 2010 amid claims Pankaj had made improper payments to himself.

Burrup was Pankaj's creation, though he was not the sole shareholder. He owned 30 per cent; his wife Radhika owned 35 per cent and the Norwegian ammonia group Yara International had 35 per cent.

When ANZ pulled the pin, it unleashed one of the biggest and fastest fee grabs in Australian history. Fourteen months later, and the lawyers, receivers and other cuff-linked bounty hunters had cleaned out a cool $56 million.

PPB Advisory and Freehills were paid almost $19 million and $13.8 million apiece. No fewer than nine law firms, a slather of consultants and the ubiquitous "assurance" firms feasted hungrily on the steaming Burrup carcass. A slew of lawsuits has ensued and the bank has a spot of explaining to do. Not that it was keen to do much explaining when approached by Fairfax Media with a list of questions last week - or, for that matter, when the bank took its annual meeting to the Oswals' old stomping ground, Perth, in December last year.

It was there that ANZ's chairman, John Morschel, flatly refused to address questions about the status of the Oswals' debt to the bank and whether appropriate provisioning had been made. The answers to these, and a host of other questions, might be concealed from the public purview but they are surely being discussed with a degree of vigour around the ANZ board table.

Morschel and his chief executive, Mike Smith, may opt to settle. If not, expect some juicy revelations to materialise over the conduct of the receivership.

Why is it, for instance, that Flagstaff Partners, a boutique Melbourne advisory firm, was appointed to advise the receivers on the sale of one of the world's largest ammonia production plants? Flagship charged $6.8 million for its advice.

How was Flagstaff appointed? Did the bank dispense with the usual "beauty parade" of investment banks with ammonia industry experience?

The Oswals' lawyers have been anxiously awaiting the decision of the Federal Court's Justice Antony Siopis, who has, since August last year, been deciding whether an inquiry should be ordered into ANZ's appointment of receivers to Burrup.

Meanwhile, the Oswals have continued to cry foul over the sale of their Burrup shares. Pankaj reckons Flagstaff bungled the share sale.

He maintains they were forced to sell to Burrup's gas supplier, Apache, on the cheap because of the negligent disclosure of the gas supply agreement - this low-priced gas contract was Burrup's best asset - during the sale process.

He claims ANZ and its advisers were exposed to a massive claim by Apache and effectively bought out this risk through the purchase of the Oswals' shares for a song.

These claims will be tested in Pankaj and Radhika's separate actions for damages in the Supreme Court of Victoria.

It is understood that, in the discovery process, ANZ's lawyers managed to produce only three documents for the court. One of them is a curriculum vitae.

ANZ got its money back quickly. Nonetheless, the bank has kept $20 million from the sale of the shares in Burrup over and above the debt it is owed.

The bank declined to respond to the question of whether it is ethical to hold back $20 million and deploy that money to defend litigation brought against it by that very borrower.

Could ANZ and PPB have achieved a better price for Burrup? The Oswals' shares were sold for just $580 million - a sum that equates to the principal owed to ANZ, plus interest and costs.

In view of this $580 million price for the Oswals' 65 per cent stake in January 2012, Burrup's other shareholder, Yara, acquired an additional 5 per cent in September 2008 for $141 million. You do the maths.

At the height of the global financial crisis, a global competitor was willing to buy shares that priced the ammonia plant at $2.8 billion.

Adding to the mystery - if that is the right word - Pankaj Oswal claims he received two approaches for his shares in December 2010, at prices that valued Burrup at

$1.5 billion.

One was from Wesfarmers, he claims; the other from Incitec Pivot.

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