BREAKFAST DEALS: Macquarie exposure

Macquarie Group puts its weight behind BrisConnections, while GrainCorp's Alison Watkins has some thinking to do.

Investment Bank Macquarie Group has shown a significant willingness to defend its position in BrisConnections, perhaps speaking to the importance big investors are placing on any infrastructure out there. GrainCorp maintains that Archer Daniels Midland is demanding exclusivity, which is something the suitor should consider dropping. Meanwhile, Ten Network is going to raise capital after all, Nathan Tinkler has lost control of his private jet and a fresh attack is being levelled at the SunRice single trader format.

Macquarie Group, BrisConnections

Macquarie Infrastructure has boosted its exposure to embattled BrisConnections by $300 million in an apparent bid to avoid administration for the Brisbane Airport Link road tunnel at a time when big global investors are keen on infrastructure assets.

The silver donut picked up $300 million worth of BrisConnections debt from Bank of Scotland International, which is pulling back on its Australian investments, generally speaking.

BrisConnections has been in a trading suspension since November 12, when an analysis of the roads traffic numbers indicated that the company’s overall value might fall short of its $3 billion in debt.

The investment bank has a lot of skin in the game. Macquarie Infrastructure owns 46 per cent of BrisConnections equity, while Deustche Bank holds another 33 per cent and the state government’s Queensland Investment Corp has 8.3 per cent.

Macquarie also holds the largest chunk of that debt as part of a group of lenders, which includes ANZ Bank, BOS International, BNP Paribas, Depfa Bank, DZ Bank, KBC Finance Ireland, Societe Generale, UniCredit and United Overseas Bank.

The syndicate’s lock-up agreement, struck after BrisConnections was suspended from the ASX three weeks ago, expired on Friday.

According to media reports, Macquarie’s chief goal is to avoid administration where cash flows would be locked up for a while. Given the interest that the investment bank has in the tunnel, that’s hardly surprising.

But considering the increasing emphasis that Macquarie is putting on infrastructure projects globally, the move is telling about the investment bank’s stress threshold for this asset class.

GrainCorp, Archer Daniels Midland

If there’s a consensus that has emerged from the improved $2.8 billion offer for GrainCorp from American giant Archer Daniels Midland, it’s not whether the target’s chief executive Alison Watkins will accept the offer.

As Business Spectator’s Stephen Bartholomeusz observed yesterday, it’s whether they choose to engage (Lying in wait for a GrainCorp gaffe, November 4).

Pressure is building on the GrainCorp board, not just because Archer Daniels Midland has secured 19.9 per cent of the register. The high turnover of stock points to a larger swath of new hedge fund residents on the register that aren’t as interested in the company’s long-term prospects as they are the takeover premium – then again, you can only secure a position as an opportunistic hedge fund if existing shareholders are happy to take profits now.

It’s being consistently reported that the new indicative offer of $12.20 a share falls short of the board’s target of $13-plus.

The combination of an increased offer, 50.1 per cent minimum shareholder acceptance and 19.9 per cent stake is proving to be a powerful combination. But the suitor should probably drop exclusivity.

First of all, exclusivity is not actually listed as one of the conditions that ADM has posted on its website, presumably because the document is structured to presume GrainCorp’s engagement. GrainCorp has said in both its response to the original $11.75 offer and the subsequent $12.20 offer that exclusivity is a condition.

Given the suitor has picked up such a large portion of the target, there’s no hurry on the part of the ADM. But giving GrainCorp the room to solicit other offers would give the board the flexibility to test its $13 target. ADM’s 19.9 per cent shareholding makes it a little difficult for those rival proposals to get up.

If ADM continues to demand exclusivity and GrainCorp declines to engage, forcing the suitor to take its offer directly to shareholders, the target board will throw its doors open to rival suitors.

ADM might have a good degree of control now that would go completely out the window under that scenario.

Ten Network

Ten Network chief executive James Warburton is reportedly on the brink of an embarrassing backdown on the company’s need for further equity, but thankfully he looks to have a posse of billionaires behind him.

The Australian Financial Review reports that Ten is prepared to launch a $225 million capital raising this morning, less than two months after Warburton said that wasn’t on the table.

The newspaper understands that the offer is set to come in at 20 cents a share, which is a shattering 40 per cent discount on the previous trading price of 33 cents.

Thankfully, the newspaper also understands that major shareholders billionaire Gina Rinehart, James Packer and Bruce Gordon are likely to support the offer.

Fortescue Metals Group, Oil Basins

The target of ambitions from Fortescue Metals Group for Australian shale gas looks to have come to the attention of the corporate watchdog.

Fairfax understands that the Australian Securities and Investments Commission is making inquiries into the share price movements of Oil Basins on the days around the announcement.

On November 15, Oil Basins said its strategic cornerstone investment from Fortescue, 18 per cent of the company, would be bedded down "within five business days”.

Fortescue’s language wasn’t as immediate, which has turned out in hindsight to be telling. The deal still hasn’t been done, with Fairfax reporting that Oil Basins hasn’t responded to numerous calls.

Nathan Tinkler, Whitehaven Coal

Embattled coal highflyer Nathan Tinkler has been grounded, losing his private jet and helicopter.

Media reports indicate that Taylor Woodings has been appointed receiver to another Tinkler company, this one is called TGHA Aviation. The vehicle owns a Dassault Falcon 900C jet and an Agusta A109S corporate helicopter.

The only secured creditor for the company, GE Capital, was the party that called in the receivers after apparently being left short.

The news comes after a truly bizarre episode last week where media reports indicated that Tinkler was facing a "liquidity event” from key lender Farrallon Capital over his $700 million in debt. Control of his $560 million stake in Whitehaven Coal, his main asset, was at stake.

As we’ve since discovered, nothing really happened.

Whitehaven is thinking about asking for temporary approval to truck coal from its Narrabri underground mine to a coal handling facility to get around a railway closure courtesy of a derailment.

Wrapping up

Leighton Holdings won’t be selling any of its telecommunications assets to Telstra Corporation, according to The Australian Financial Review.

The newspaper reports that the Leighton sales process for its Nextgen, Metronode and Infoplex businesses has entered the second round, with Telstra being counted out. A final agreement looks unlikely to be struck by Christmas.

Meanwhile, American law firm K&L has voted in favour of a merger with Australia’s Middletons, adding to a growing list of local firms merging with international operators.

And finally, a report by Deloitte Access Economics says that Australian rice growers are getting a raw deal from SunRice as a single desk trader.

Questions about whether the monopoly should be maintained speak to various pushes to take SunRice onto the ASX.

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