Will Macquarie get a vote?

Last night the BrisConnections saga took a new twist when litigators at IMF let it be known that if they and Nick Bolton win their court cases and BrisConnections is allowed to hold a shareholders' meeting aimed at winding up the company, there may be a new surprise waiting for Macquarie.

IMF is considering applying to the court to prevent Macquarie from voting at any shareholders' meeting which would neuter the 8.2 per cent of BrisConnections Macquarie bought yesterday on market.

There are very few precedents that stop shareholders voting at a meeting. Nevertheless, where a shareholder has jointly underwritten a $390 million call and has made substantial advances to the company there is a case to be argued against that party voting – especially as, if BrisConnections is not wound up, mum and dad shareholders could lose their houses.

A good lawyer would contrast the wealth of Macquarie and its earlier sale of BrisConnections stock with the desperate plight of the other shareholders.

I am making no predictions about which way the court would decide on the voting issue and at best it would be very close to a 50/50 case.

Macquarie needs at least a 25 per cent vote to block a wind-up and the chairman of BrisConnections, Trevor Rowe, chairs the Queensland Investment Corporation which holds 10 per cent of the stock. Capital Group has 7 per cent, so Macquarie clearly believes the latest 8 per cent gives it the numbers.

Macquarie is also attempting to get the Queensland courts to declare that a call takes precedence over a wind-up.

But if (and as I stressed yesterday, these are big 'ifs') the wind-up meeting went ahead and IMF were successful in preventing Macquarie from voting and the call was stopped, then the BrisConnections project would be in jeopardy.

The Queensland court action is also designed to keep the consortium of lending banks from breaking up. The ANZ Bank has committed to loan $280 million, but the balance of the $2.9 billion is to come from foreign banks. With most of the BrisConnections equity now lost, they are seeking every avenue possible to escape the loan arrangement.

IMF says that it is not representing any banks in appearing before the court. It is doing it purely on a pro bono basis to help unfortunate shareholders who have been caught.

People who undertake pro bono activities usually put their very best foot forward and the action of Macquarie in buying BrisConnections stock and attempting to use the Queensland courts to shore up its position (Macquarie makes its move, March 30) was a warning that the cracks I identified yesterday are very wide.

The newspapers this morning repeated much of Business Spectator's material from yesterday but added some new key points:

– Macquarie's 8.2 per cent stake has been bought through a $1 shelf company, CAN 136 024970, created on March 23 this year. The one share in that company is owned by Macquarie Capital Group. Fairfax journalist Mark Hawthorne's revelation that the shares have been bought through a $1 company means that it is conceivable that this company may not pay the call, making the joint underwriter Deutsche pick up half the tab.

– Many of the Macquarie shares in BrisConnections were bought from people who had already sold their shares to Brisbane Toll Road Link Pty Ltd, which has acquired 5.18 per cent of the stock (Banned US stock promoter behind stake in BrisConnections, March 31).

– The frustration of Deutsche spilled over into all the papers ,so it appears that in off-the-record briefings someone close to Deutsche declared deep unhappiness that Macquarie, its co-underwriter, had sold its BrisConnections stock some months ago, so smashing the BrisConnections share price and leaving the call in the hands of mums and dads. The Australian went further saying that Deutsche is arguing in a separate court case that the call is not payable in a wind-up.

This saga is just beginning – there is a lot more to come.