BREAKFAST DEALS: Deal or no deal?

Reports Nine's lenders have struck a debt deal appear premature, and Macquarie may get another asset management business.

Reports that Nine Entertainment had secured a deal with its lenders to keep it from receivership turned out to be a little premature – from what we can tell, PBB Advisory might still have a gig. But regardless of what happens, Nine boss David Gyngell says he will remain at the helm, receivership or not. Meanwhile, Macquarie Group has emerged as a front-runner in the bidding for another asset management business. And in mining, Rio Tinto again has to tussle with the Mongolian government, while Gina Rinehart’s Roy Hill deadlines could be up in the air.

Nine Entertainment, CVC Asia Pacific, Goldman Sachs, Apollo Global Management, Oaktree Capital

Nine Entertainment goes into its second day beyond Monday’s ‘deadline’ still without an agreement with its bickering lenders, but it appears some progress has been made.

Media reports indicated yesterday (Tuesday) that a break through of sorts had been reached, but by the end of the day it was clear that the marathon talks were going to stretch into Wednesday.

If nothing comes of it and Nine has to lean on PBB Advisory for receivership, Fairfax reports that chief executive David Gyngell has confirmed he will stay on.

Other reports point to the US hedge fund senior lenders Apollo Global Management and Oaktree Capital coming tentatively closer to a consensus with mezzanine lender Goldman Sachs about the value that the latter should be entitled to.

The debate appears to be about structure. Should Goldman receive a little more equity with a new Nine remaining debt laden, or a little less equity without the debt.

As for Gyngell, Fairfax says he remains "quietly optimistic” that the network can be saved from receivership.

Macquarie Group, Robeco

Australian investment bank Macquarie Group is said to be one of the "leading candidates” to pick up the asset management arm of Dutch bank Rabobank.

According to Reuters, Macquarie is at the head of the queue with Japanese firm Orix Corp for the Robeco business that sources indicate could go for up to €3 billion ($3.8 billion).

Macquarie has made it pretty clear that it’s looking to increase its asset management business over the last few years.

In 2009, the investment bank picked up Delaware Investments for $US458 million and was more recently it was strongly linked to the sale of ING’s Asian asset management arm.

Macquarie and Onix are also up against a consortium bid led by Advent International and CVC Capital Partners, along with Boston asset manager AMG Inc and Permira.

Rio Tinto, Oyu Tolgoi

Mining giant Rio Tinto says that construction on its flagship Oyu Tolgoi copper-gold project in Mongolia is 97 per cent complete and negotiations with the Chinese government over a power supply deal are "actively progressing” (apparently the word ‘progressing’ alone didn’t suffice).

But the upbeat tone was overshadowed by news that the Mongolian government has once again asked for negotiations to be re-opened on the ownership arrangements for the $10 billion project.

Rio said in a statement that its subsidiary handling Oyu Tolgoi, Turquoise Hill Resources, had rejected the request detailed in a letter received from the country’s Minister for Mining Davaajav Gankhuyag, who is a noted resources nationalist.

The minister was one of the figures encouraging the Mongolian government to renegotiate the terms about a yea ago, before Rio had become become a majority owner of Canada’s Ivanhoe Mines.

Since then, nothing has really changed to give the Mongolian government any extra leverage over Rio. What has changed is the power balance in the north Asian country.

More than twenty-five per cent of Mongolia’s parliament, governed by a coalition, is now held by candidates that made foreign mine ownership a campaign issue during the June elections.

Indeed, Rio publicly mused during the last confrontation that the renegotiation push might be simply a chest-beating exercise in the lead up to polling day.

In September, Turquoise Hill was forced to abandon a deal to sell its stake in Mongolian coal miner South Gobi Resources to China’s Chalco due to opposition from the government. The company said there was "minimal prospect” of securing the regulatory approvals, reflective of the government’s disquiet with foreign ownership levels – particularly China.

That Sino-Mongolian rivalry was thought to be behind the delays that Rio has faced securing the power deal that will light Oyu Tolgoi up. The miner subsequently denied this.

While Ulan Bator, the Mongolian capital, doesn’t appear to have a better hand to grab a greater slice of Oyu Tolgoi, it appears there’s enough political capital around to cause Rio some headaches.

And presidential elections are scheduled for next year.

Fortescue Metals Group, Gina Rinehart

Don’t get ahead of yourselves, Andrew ‘Twiggy’ Forrest and Gina Rinehart aren’t doing a deal. But they are Pilbara neighbours with financing stories on the hop, so it makes sense to talk about them together.

As the business pages indicate this morning, Forrest is on a role. Fortescue Metals Group chief executive Nev Power says work on the $1.1 billion Kings iron ore project that was stopped in September as the iron ore price sunk towards $US80 a tonne, would be started up again at $US120.

This is on top of previous encouraging comments from Power outlined just yesterday in this column, that Fortescue’s 155 million tonne production target for 2013 could be reclaimed.

What brought this dramatic change in mood about was the iron ore miner’s $US4.5 billion ($4.4 billion) refinancing agreement, which was later bumped up to $5 billion thanks to strong demand from the market at 5.25 per cent.

Fellow mining billionaire Rinehart is also trying to secure financing to achieve her own iron ore ambitions in the Pilbara.

The mood surrounding the discussions over the $9.5 billion Roy Hill project can be summarised by the contrasting descriptions in two of our major papers in their first sentences on the story.

The Australian Financial Review reports that the lengthening timeframe taken to get the finance locked means "the project may be deferred until 2016,” while The Australian reports "the project is still on track to meet its 2015 production deadline”.

This is part and parcel of reporting on privately owned companies. The internal dealmaking movements are far more hidden from the public eye (the Nine Entertainment negotiations being the most glaring exception to this rule).


While it would still be a few months away, Coles owner Wesfarmers is reportedly thinking about joining Woolworths in spinning off some property assets to unleash capital.

Reuters has spoken to sources that confirm an earlier report in The Australian Financial Review that Wesfarmers has tapped Royal Bank of Scotland, Goldman Sachs and Jones Lang Lasalle about creating an unlisted real estate trust valued at $700 million.

That would act somewhat as a mirror to the action taken by Woolworths, which created a listed $1.4 billion vehicle called SCA Property Group.

Meanwhile, the AFR reports that Woolworths is headed for another clash with the Australian Competition and Consumer Commission (ACCC) over its hopes of picking up the supermarket and liquor licence of IGA retailer John Krnc (don’t ask us for phonetics on that surname).

Krnc Group owns the SUPA IGA site in Canberra suburb Hawker.

This adds to Woolworths existing tussle with the ACCC over its hardware store plans in the Victorian suburb of Ballarat.

Wrapping up

Billionaire property developer Lang Walker has told The Australian that he would think about offloading a slice of his company’s $1.5 billion office site at Melbourne’s Docklands to Singaporean company CIMB TrustCapital Advisers.

Walker Corporation has just opened the first tower at its Collins Square development for the Australian Taxation Office.

Meanwhile, Leighton Holdings subsidiary Visionstream is picked up the licence for young electric vehicle support company ChargePoint. The company is the operator of the charging stations for electric vehicles throughout Australia and New Zealand, although no one needs to be told that the industry is in its absolute infancy in Australia.

And finally, Fairfax reports that the federal government has no plans to privatise Medibank Private. Over to you Mr Hockey.

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