THE DISTILLERY: Leighton devastation

Jotters dig into Leighton's latest downgrade, with one seeing Hamish Tyrwhitt's fate in the balance.

A lot more ink is spilled this morning over Leighton, which surprised the market with another round of big writedowns. Commentators debate who's to blame for Leighton's shocking downgrade – and whether there could be more bad news ahead – while another relays fears that Treasurer Wayne Swan might look to the mining industry to bolster the budget.

In The Australian, Tim Boreham reckons there are lessons in the construction company's hasty fall.

"Today's revision stemmed from a hasty acceleration of the March-quarter review, which shows that even the three-monthly reviews aren't timely enough to satisfy continuous disclosure requirements – other contractors: take note. A broader implication is whether management's confidence in its $44.5 billion suite of 440 broader projects can be relied on if conditions can deteriorate so quickly."

Meanwhile, in the same paper, John Durie argues that after three downgrades in a year, responsibility for Leighton's problems now now rests firmly of Hamish Tyrwhitt's shoulders.

"Up 'til now Hamish Tyrwhitt has managed to avoid responsibility for the string of problems to hit Leighton but that streak ended with today's writedowns which, while making up for someone else's handiwork, are his numbers. Leighton is, of course, a victim of weak board members who refused to shut down the Wal King era before the rot set in and Tyrwhitt is now left to pick up the pieces. …But Tyrwhitt’s new bosses at Spain’s ACS are unlikely to give him the same latitude that David Mortimer et al gave Wal King."

The issue is also tackled by Bryan Frith, who warns it will take quite some time for Leighton to win back investor trust, and The Age's Ian Verrender, who argues that Leighton's Spanish parent, ACS, is now likely to crack down even harder on the Australian group.

At The Australian Financial Review, Matthew Stevens is more concerned by a different downgrade, wondering whether the government might turn to the mining industry to bring the budget back to health after Wayne Swan revealed a gaping $20 billion hole in tax revenue.

"The industry reckons the government has exploration and prospecting deductions in its sights and that it might be reviewing the specific concessions that allow miners a more rapid write-off period for short-life assets along with a community of smaller assistance programs including research and development assistance. There is talk, too, that there will be changes to the so-called 'thin capitalisation' regime that allows tax deductions for loans from an offshore parent to an Australian subsidiary."

And to understand just how big Swan's task is, The Age's Malcolm Maiden puts it into perspective: "Peter Costello’s famous first budget in 1996-97 cut outlays by 0.5 per cent in year one, and by 2.1 per cent in 1997-98. The same budget would save about $10 billion over two years today – about half what is needed to close the tax revenue gap that has apparently opened up."

Also in politics, The Australian Financial Review's Jennifer Hewett hits out at the glacial speed of physical progress on Labor's national broadband network, but says the coalition's broadband plan probably wouldn't be much quicker. And The Australian's Glenda Korporaal seizes on Prime Minister Julia Gillard's comment that the pre-GFC world is never coming back, arguing that it's time for the Reserve Bank to cut interest rates.

Meanwhile, over at The Age, CBD columnist Scott Rochfort says the retail recession hasn't reached the wallets of Westfield's co-chiefs Peter and Steven Lowy, who continue to be paid big bucks, and Michael West continues his crusade against companies he says are failing to comply with the Australian Securities and Investment Comission's filing rules, today targeting a collapsed NSW construction firm.

*An earlier version of this column incorrectly stated that BlackRock's World Mining Fund had significantly reduced its stake in BHP Billiton. The relative weighting of BHP Billiton in the fund has decreased as a result of the underperformance of BHP Billiton’s share price relative to other companies in the fund and an increase in assets under management in the fund.

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