Bringing the New News in a brave new world

Here in newspaper-land, we don't luxuriate in billion-dollar government handouts, as do the big auto makers Ford, Holden and Toyota.

There is no solace for us in a $380 billion Reserve Bank bailout fund, which is the good fortune of ANZ, CBA, NAB and Westpac. Neither are we rusted together with the apparatus of state in the cosy shelter of a Marxist-Leninist monopoly, as is the delight of the ASX.

We don't pay 0.0001 per cent tax on each billion dollars of revenue like Google Australia, while they kindly unfurl our $40 billion broadband highway. No, we have our pride. You won't see a newspaper company putting on an Oliver Twist routine for corporate welfare dole-outs.

Over at rival sweat shop, Rupert Murdoch's News Ltd - where the commentary is more Dickensian than the labour conditions - the New Newscorp shares began trading this week, on a deferred basis. It's called New News because that's where all the old-world media assets reside, the newspapers.

And you could have knocked us down with a feather; all the New News columnists really loved the deal. Fancy that.

At 82, Rupert is determined to be the last man standing in newspapers. The Sun King has furnished New News with a war chest of $2.5 billion in cash, and no debt. Its assets, including Foxtel, The Wall Street Journal and newspapers in Britain and Australia (75 per cent of the market here), may be "ex-growth" but are veritably spitting out the cash.

Under the quid pro quo between Rupert and his US chief executive Chase Carey, News Corp's entertainment spin-off, 21st Century Fox, gets to trade on a higher multiple without the drag of old-world assets. Makes sense. The stock, now two stocks, beat the market this week.

Also, Carey and the US institutions were never going to countenance the allocation of capital to the rust belt of old media.

The note that was missing in the upbeat cantata from the Vienna Boys Choir of News Ltd commentators was the risk to earnings from hacking, bribery and perversion of the course of justice.

A settlement is expected shortly with the US Justice Department, mooted at $850 million, for alleged violations of the Foreign Corrupt Practices Act. The impending trial of Rebekah Brooks, and the potential fall-out from the Wendi Deng divorce, are the two other "known unknowns", though the latter should be quarantined from the stock.

The liabilities don't all lie with New News though. The newspaper group shoulders the criminal risk and Fox takes the civil costs. Even with the spectre of a few payouts then, and accounting for the mooted $300 million to $400 million in restructuring costs, New News has a handy balance sheet for Rupert's next round of acquisitions.

Big bucks for what?

What does $80 million in liquidators' and lawyers' fees buy you? Answer: Nothing.

The settlement, which was supposed to have been struck this very week, after five years, between Lehman Brothers Australia and the councils, churches and charities, has collapsed in a smoking ruin.

As if the sheer magnitude of the fees to the insolvency privateers from PPB were not grotesque enough, the deal collapsed due to the most extraordinary turn of events.

Even the lawyers themselves were calling it shameless. An operative from Lehman Brothers in New York, one Abhishek Kalra, had quietly bought some proofs of debt from another Lehman entity in Hong Kong a couple of weeks ago. These debts made Kalra a Lehman Australia creditor to the tune of $130 million, more than enough to derail the deal with the councils, churches and charities, which had toasted hundreds of millions buying Lehman's financial products.

Here's the catch: Abhishek Kalra was one of the Lehman investment bankers who concocted this toxic rubbish in the first place; including the infamous Federation CDO (collateralised debt obligation), which blew up in short order. Having been responsible for the losses of the not-for-profits, he has now scuttled their settlement in a sneaky bid to get a piece of it himself.

What did his lawyer, Philip Hoser from Jones Day, think about the ethics of this?

"There is no question of our client, Lehman Brothers Holdings Inc, or our firm, acting unethically or improperly in any way."

Why didn't PPB and its $30 million worth of legal advice see this coming? The councils, churches and charities bought more than $1 billion in toxics from Lehman during the boom, and quickly incurred huge losses.

Lehman bit the dust in September 2008, PPB was appointed liquidator of Lehman Australia.

Instead of doing a deal with the creditors they fought them all the way to the High Court. By last August they'd racked up $62 million in fees, of which $28 million went to law firms. The fees ratcheted up another $20 million as they prepared the scheme settlement.