BREAKFAST DEALS: Macquarie's mortgage tiptoe

Macquarie Group has snapped up a larger stake in mortgage lender Yellow Brick Road as Commonwealth Bank appoints investment banks for its property platform. Meanwhile, Seven Group and Carlyle Group are holding Coates Hire for the meantime, Fortescue Metals Group is taking its time to sell a minority stake in its infrastructure and the slumping coal price is putting up questions at more players than just Nathan Tinkler.

Macquarie Group, Yellow Brick Road

Investment bank Macquarie Group is throwing a little extra into mortgage lender Yellow Brick Road as YBR's chairman Mark Bouris tries to pinch some business off the big four.

The silver donut bumped up its stake in to 10.5 per cent from 8.3 per cent at 56 cents a share, setting it back $2.2 million in the process. So it’s chump change.

YBR is now sitting with a market cap of $95.5 million following a 40 per cent rally since Macquarie invested in the lender back in last December last year.

Bouris’ vehicle only has about 1 per cent of the local mortgage market and apparently Macquarie's chief Nicholas Moore doesn’t expect that to go much above 2 per cent in the next few years.

While that isn’t official, it’s more significant than it appears. While YBR has access to Macquarie’s 137 branches, it’s utterly miniscule compared to the big players like Commonwealth Bank with its $106 billion market cap.

Doubling business in that timeframe with that calibre of competition, even from a low base, is a worthy goal. Also, when you think about it, mortgage holders take out their loans in the decades and as an experiment from Treasurer Wayne Swan clearly demonstrates, getting them to shift can be difficult.

Macquarie is using its relatively cheap deposits from its wealth management arm to give YBR the firepower to offer loans at a substantial discount to the big four that still produce a compelling return.

It’ll be slow, but one day Macquarie could have itself a sizeable slice of the Australian mortgage market on its books. One would expect the silver donut to match that with a larger share of YBR – perhaps more – if that were to happen.

Commonwealth Bank of Australia, Colonial First State Global Asset Management, GPT Group, Brookfield

Speaking of Australia’s most valuable bank, GPT Group has apparently lined up its next potential target after its Australand bid with an approach to CBA’s Colonial First State Global Asset Management.

Sources have told The Australian that GPT and Canadian major Blackstone have reached out to Colonial First State. It’s understood that UBS and Goldman Sachs have been appointed as advisers for a sale of the real estate arm that could be worst $1.2 billion.

GPT tried unsuccessfully to do a deal with Australand, which is on the block thanks to a review from majority shareholder CapitaLand, for its non-residential assets. Unfortunately, it all came to nothing.

Seven Group, Carlyle Group, Coates Hire

Seven Group billionaire Kerry Stokes and private equity giant Carlyle Group have given up the idea of offloading the Coates Hire because financial markets have spooked potential buyers.

In a short statement to the ASX, Seven said the review of the $3 billion equipment hire company had been completed and the pair has decided to maintain the existing ownership structure.

The sale process attracted the likes of Australia’s Wesfarmers, Malaysia’s UMW Holdings and Japan trading mammoth Mitsui, but failed to generate a compelling offer.

There’s no doubt Coates will be attractive to someone. But with Federal Reserve chairman Ben Bernanke talking about the end of QE3, sharemarkets are very choppy and the Australian dollar is in a dive.

A sliding dollar of course makes the asset cheaper to an overseas buyer, however volatility clouds the outlook of the business.

So Seven and Carlyle will sit for now. There has consistently been speculation that the pair could launch Coates onto the ASX. But again, the choppy equity markets make a move like that difficult to say the least.

So we wait.

Fortescue Metals Group, The Pilbara Infrastructure

Andrew Forrest’s Fortescue Metals Group was smashed yesterday by investors as its corporate update combined with the Chinese purchasing managers index from HSBC to serve as an almighty reminder that the iron ore player is still vulnerable with a big pile of debt.

On Fortescue’s recent efforts to get its finances under control, Business Spectator’s Stephen Bartholomeusz offers this conclusion.

“It has made good progress on costs and production and is almost over the hump on the heavy capital expenditure program associated with its massive ramping up of production. To really de-risk its balance sheet, however, it needs to build its cash reserves further and that sale of the interest in its Pilbara Infrastructure.”

Read the piece. As usual, Bartholomeusz closes the book on it.

On the attempts to sell a minority stake in The Pilbara Infrastructure, which harbours Fortescue’s port and rail assets, as expected chief executive Nev Power had to push back the deadline.

“Fortescue is not under pressure to conclude a sale of an interest in its rail and port assets,” said Fortescue in a statement.

“However the level of interest generated has necessitated a longer period of evaluation than previously contemplated.”

Power said he is pleased with the progress so far, adding that shortlisted candidates have “advanced to the next stage of the commercial process”.

That’s nice, but it was expected that a deal would be done by now. Fortescue now anticipates that if an agreement is reached, it’ll probably happen “in the September quarter”.

And while we’re talking infrastructure investment, Fairfax Media reports that the $12 billion industry fund HostPlus is assembling its own in-house team to look at infrastructure opportunities.

Aurizon, GVK Hancock Coal

Aurizon chief executive Lance Hockridge admits that not all projects in the Galilee Basin in Central Queensland will go ahead, but he’s reportedly confident that the haulage company’s deal with GVK Hancock Coal will proceed.

Speaking to The Australian Financial Review after a lunch in Brisbane, Hockridge said some of the speculation that the greenfield $6 billion rail link from the Basin to Abbott Point “simplistic”.

“GVK is trying to convince people about the viability of the mine. We’re confident that at a certain point [in] time that will go ahead given the quality of the resource. But whether they can get it done is a matter for them,” said Hockridge, according to the AFR.

The slumping coal price has brought a number of deals into question. Just two days ago, Nathan Tinkler finally gave up his stake in Whitehaven Coal.

The AFR reports that Whitehaven managing director Paul Flynn says the company will “seriously consider” offering Tinkler’s lender Farallon Capital Management a board seat.

After the Tinkler sale, Farallon emerged with another 9.9 per cent of Whitehaven to bring its total holding to 16.6 per cent.

Meanwhile, the head of the world’s largest processor of palm oil, Martua Sitorus, has popped up on the Whitehaven register as its newest substantial shareholder with 5.8 per cent.

Sitorus is chief operating officer at Singapore’s Wilmar International and it looks like he and his associated companies started buying Whitehaven stock back in March.

Wrapping up

Gambling company Tabcorp has secured exclusivity for its New South Wales retail wagering market by handing over $75 million to the state government.

Speaking of NSW and gambling, today’s the day Crown and Echo Entertainment have to submit their proposals to the O’Farrell government for their Sydney casino expansion plans.

And finally, embattled resources company Intrepid Mines survived an attempted coup yesterday by a Hong Kong private equity group.