DataRoom AM: The Star Packer

James Packer tries his luck in Hollywood while Gina Rinehart's Roy Hill iron ore project could face a funding snag.

It’s show time for James Packer as the billionaire journeys to Hollywood for a new source of income – and a great marketing tool for his casinos to boot. Fellow rich-lister Gina Rinehart is also getting plenty of media coverage, with her massive Roy Hill project potentially running into a financing problem in the form of disgruntled US miners. Elsewhere, market players view Transurban as a likely buyer of Sydney’s Cross City Tunnel, Andrew Forrest shows support for Poseidon Nickel and Leighton scores two significant contracts.

James Packer, Warner Bros, Crown

James Packer may have garnered plenty of media coverage after he split from wife of six years Erica Baxter in early September, but the challenging period certainly hasn’t seen him back away from new business opportunities.

The latest development is a big bet in Hollywood, signing a four year $US450 million ($482.86 million) co-financing deal with Warner Bros for the development of as many as 75 films through Ratpac-Dune Entertainment.

Ratpac-Dune is an investment vehicle backed by Packer in combination with director Brett Ratner (Rush Hour, Prison Break) and investor/banker Steven Mnuchin, a former CIO at Goldman Sachs who has been involved in financing Hollywood blockbusters like Avatar and Life of Pi.

The first of the films to hit theatres will be Gravity and Grudge Match this year, with both titles having the star power (George Clooney, Sandra Bullock, Robert De Niro) to make a mark at the box office. But Packer has bigger plans than just making money through ticket and DVD sales.

The media and casino mogul is also looking to use the films as marketing tools for his hotels and gaming business. He told the Australian Financial Review that a Melco Crown property would be on display in the upcoming Rush Hour 4 movie while he will assess options down the track to show off his new Barangaroo property.

“Sydney remains my first, second and third priority,” he told the AFR while explaining his plans to spread his investments across the US, China and Australia. “This helps that. We can use the movies to help put the Sydney hotel on the map.”

To feature Barangaroo the four year deal would need to be extended as the Sydney hotel and casino will not be completed until near the end of the decade, though Mnuchin expressed optimism about such a prospect in an interview with Variety.

Gina Rinehart, Roy Hill, Caterpillar, Cliffs, Network Ten

The worth to America of Gina Rinehart’s Roy Hill project in Western Australia is a point of conjecture that could see financing for the project impacted.

The $10 billion development is set to receive $US650 million in funds from the US Export-Import bank but US miners, led by Cliffs Natural Resources, are looking to block the loan on national interest grounds, according to the Financial Times.

The miners argue the project’s construction will hurt their businesses, but they are meeting opposition from US equipment suppliers who are set to reap significant value from the development.

Caterpillar has said a lack of funding for Roy Hill could see a potential loss of $US500 million for the US mining equipment industry.

Rinehart’s Hancock Prospecting, a 70 per cent owner of Roy Hill, is hoping to tie up financing arrangements by the end of the year with construction to begin in late 2015. A block of funds from the US Export-Import Bank could impact these timelines though it is unlikely to cause too much damage. Regardless, expect Caterpillar to get its way given its comparative size to Cliffs.

Speaking of Packer and Rinehart, both billionaires were reportedly not responsible for the sale of one per cent of Network Ten’s stock yesterday, according to The Australian Financial Review. The two both have significant investments in Ten but the seller was likely to have been a long suffering institutional investor keen to cash out before the company’s results, according to the AFR.

Cross City Tunnel, Transurban, Bettina Liano

Expressions of interest in Sydney’s Cross City Tunnel are due to be delivered to receiver KordaMentha next Tuesday.

The 2.1km tunnel fell into the hands of liquidators last month for the second time in its short history, seven years after the first. There is expected to be interest from local and international infrastructure investors with ASX listed Transurban seen as a likely suitor. The price-tag is expected to be around $500 million to $600 million.

The development follows the offloading of Brisbane’s troubled Clem7 Tunnel for $618 million last week, which was picked up by Queensland Motorways. Like Queensland Motorways, Transurban is viewed as a frontrunner given the synergies a deal would provide with its five other Sydney motorway investments. This should pave the way for the group to offer a premium compared to other investors.

Speaking of the toll road owner, Transurban has issued €500 million ($724.8 million) of secured fixed-rate seven-year notes in order to pay down short-term debt. The group said the issue would provide further diversification of funding sources while increasing the average life of senior facilities.

Also facing a forced sale is Australian womenswear brand Bettina Liano, which has entered administration for the second time in two years. While administrators Chadwick Hall arrange a sale of the 27-year-old business it will largely be business as usual.

Andrew Forrest, Poseidon Nickel

Andrew Forrest may have stepped down from his prominent role as chairman of Poseidon Nickel on Friday for philanthropic reasons – he was actually in New York at the time speaking for the Clinton Global Initiative – but he hasn’t given up on the company altogether.

The Fortescue founder and rich-lister maintains a 30 per cent interest in the group and has now again extended the deadline for repayment of the $8 million loan he provided back in April 2012. It now falls due on October 1 next year with Twiggy requesting the proceeds be raised via an equity raising “as soon as reasonably practical.”

The likelihood of an immediate raising is unlikely given softness in the company’s share price — it closed down 24 per cent yesterday upon relisting after a trading halt.

Leighton Holdings

Construction group Leighton Holdings has scored two big contract wins this week, in Melbourne and Dubai. The ASX-listed firm first reported subsidiary Leighton Contractors had signed a $370 million contract for construction of a transport facility and a new airline terminal at Melbourne Airport. Works will begin this month and are slated for a 2015 conclusion.

Then the company announced its 45 per cent owned associate Habtoor Leighton Group had signed a 275 million dirham ($80 million) contract to construct the next phase of a convention centre in Dubai. Habtoor Leighton started work on the 1.9 billion dirham project back in 2007 with the latest arrangement scheduled for completion by the end of 2014.

Leighton shares not surprisingly received a boost on the news, albeit minor, lifting over 1 per cent in trading yesterday. It rounds off a pretty good month for the group, with a number of contract signings and a 10 per cent lift in its share price.

Wrapping up

Former Xstrata chief Mick Davis, famous for taking the miner from a $500 million midcap to a mining giant, is again building a war chest. The funding of $US1 billion from TPG and Noble will allow Davis’ new venture – X2 Partners – to make a raid on mining assets around the world, and there is no shortage of options.

In oil and gas, Chevron has inked a 20-year deal with Japan’s Tohoku Electric Power Company to supply LNG from the Wheatstone project in WA. The deal means 85 per cent of Chevron’s LNG equity in Wheatstone has been committed long-term to customers in Asia. The deal will supply as much as 0.9 million tonnes of the combined capacity of 8.9 million tonnes per annum.

Moving to tech news, and Telstra has bought a 50 per cent stake in healthcare technology provider Fred IT Group as it looks to build a presence in healthcare. According to the AFR, the stake may have cost as much as $25 million. Also in tech, major US player Intel has purchased Australian and US-headquartered information security firm Sensory Networks for $20 million, according to Tech Crunch. Sensory Networks, which already had a relationship with Intel, was founded by freelancer.com boss Matt Barrie and is likely to be integrated into Intel subsidiary McAfee. Sticking with the sector, listed investment firm Blue Sky Alternative Investments has acquired Melbourne software developer Readify for $16 million.

And finally, the owners of Spotless Group – Pacific Equity Partners, have sold $US1.08 billion in loans as part of a debt refinancing. The deal was managed by Deutsche BankGoldman Sachs and UBS, but no confirmation yet on whether this is a clearing of the decks before a relisting on the ASX.