Seven's prenup puts divorce in the too-dear basket

SHAREHOLDERS in Seven Network may be forgiven for wondering yesterday if Kerry Stokes has become twitchy about his television and magazines businesses, after reading the broadcaster's notice of its annual general meeting next month.

Seven will ask investors' permission to sell its remaining 47 per cent stake in the Seven Media Group to its private equity partner, Kohlberg Kravis Roberts, should a serious falling-out over the media venture arise over the next 12 months.

But the resolution is in fact seeking a renewal of shareholders' permission obtained last year to back up the company's prenuptial agreement with KKR.

The deed is aimed at resolving disputes that would jeopardise the future of the media venture, which runs Channel Seven and Pacific Magazines.

It allows either party to offer to buy out the other in case of a falling-out.

But the catch is in the divorce settlement. According to the fine print, KKR would have to cough up at least $700 million to buy out the Stokes camp, making it unlikely anyone would want to trigger a buy-out. Media analysts at Deutsche Bank and Merrill Lynch have estimated the equity value of Seven's stake in the venture at $150 million, far below the $735 million in cash KKR stumped up when it signed on the dotted line in late 2006. ABN Amro even argued last month it was "not appropriate to attach any value to this stake at the current time, given Seven Media Group's high debt levels and advertising market weakness".

Sounds like marriage counselling may be the better option if the need arises.

Coal hard cash

Two weeks ago, Merrill Lynch retail analyst David Errington warned that Wesfarmers shareholders might be in for a shock if coal prices fell back to earth.

His UBS colleagues are now forecasting precisely that, flagging that coking coal prices will fall 17 per cent next financial year, having previously predicted they would remain flat.

Record coal earnings are producing much of the free cash flow which Wesfarmers is using to refurbish its Coles supermarkets, and without them the company will have negative free cash flow, Errington says.

Paper view

The Paperlinx capital raising - at a 29 per cent discount to its previous close - sent the paper maker's share price plunging yesterday.

Paperlinx shares fell as much as 50c during the day before closing 39c lower, down 23 per cent, to $1.36. This compares to a share price above $3 this time last year. Paperlinx raised $150 million from institutional shareholders at $1.25 a share and may raise another $77 million from retail shareholders, says Goldman Sachs JBWere.

According to Goldies, the capital raising will be significantly dilutive for investors. It is projecting Paperlinx earnings per share will by 12 per cent this year and 18 per cent for 2009-10.

Opes dashed

Opes Prime creditors are caught between the devil and the deep blue sea, with reports from the administrators recommending the failed margin lender be put into liquidation at the creditors' meeting in Melbourne next Wednesday.

While the administrators say there are "substantial claims" available in liquidation it potentially closes out many creditor accounts just as the sharemarket does its worst.

According to calculations from before the recent market plunge, 75 per cent of Opes clients (now creditors) were worse off because their accounts were not automatically closed off when administrators were appointed in March. Some creditors have gone from being owed money by Opes to owing it money as shares offered as collateral are now worth less than the loans.

The pot of gold at the end of the rainbow for creditors is the liquidator's potential action to overturn the secured charges of ANZ and Merrill Lynch and get these Opes financiers to hand back the money. This could yield $270 million from ANZ alone.

Another possibility is the mediated settlement being conducted with the banks. The administrators say "significant progress" has been made in the mediation, with the deadline being extended until October 20.

Rags in tatters

The plunging Aussie dollar is hurting more than national pride.

The retail sector is expected to take its fair share of punishment with socks-and-jocks maker Pacific Brands, surfwear company Billabong, and Just Group among the hardest hit. Wesfarmers, which now owns Target and Kmart, will also suffer. Thesecompanies import most of their clothing from China and pay in US dollars.

Billabong imports about 80 per cent of its clothing from countries where it pays in US dollars, while Pacific Brands imports about 70 per cent, and Solomon Lew-owned Just stores import about 60 per cent.

Citi retail analyst Craig Woolford has said retailers will continue to enjoy the benefits of the high dollar until the end of the year because of hedging contracts.

Nice price for Nexus

It is rare to see a big line of shares sold at a premium price in today's volatile market, but Nexus Energy proved an exception. Nearly 2 per cent of the company changed hands at $1.25 yesterday morning - a 22c premium to the previous day's closing price of $1.03.

Roc Oil, which owns 10.3 per cent of Nexus following its takeover of Anzon Australia, yesterday ruled itself out as the seller - but that doesn't mean Roc won't follow suit. It is proceeding to compulsory acquisition of Anzon, and Xchange understands it is a likely seller of the Nexus stake. No doubt it is hoping for a similar premium.