Almost 10 years ago, a young Millionaire Factory deal-maker called Nicholas Moore landed what was then his biggest ever coup. A Macquarie Bank consortium won the giant Loy Yang A power station in Victoria with a bid valued at a staggering $4.855 billion.
At the press conference on the fourth floor of 1 Treasury Place, Moore’s team gloated that they won the day thanks to “clever debt” – all $3.9 billion of it. A jubilant Moore was seen hugging and back-slapping his colleagues as they walked out of Jeff Kennettt’s office and back down Collins Street.
Macquarie pocketed more than $60 million in fees but Infrastructure Trust Australia, which became Macquarie Infrastructure Group, wrote off more than $100 million as Loy Yang Power fell into the hands of its bankers, unable to service its crippling debt. Most of the $1 billion in equity was lost and the key foreign investors, US power companies CMS Energy and NRG, collectively wrote off about $700 million.
Will the same thing happen to Qantas? It’s a big risk but the market is not overly concerned.
Indeed, Macquarie Bank were up again near a record high this morning after analysts predicted the bank would collect fees in excess of the $525 million in equity it is committing to the consortium.
Similarly, shares in Allco Finance hit a record high this morning, rising another 18c to $12.37. This values David Coe’s 30.2 million shares at $375 million, suggesting he is worth much more than the $296 million claimed by BRW given that he has substantial other interests.
However, both Macquarie and Allco Finance have far bigger plays that are just straight equity investments. Allco is defending its position as the biggest owner of Qantas planes and Macquarie wants to pocket $500 million slicing and dicing the various assets.
This is a deal full of Macquarie alumni. The former managing director of Macquarie Bank, Tony Berg, was executive chairman of Allco Finance until a restructure last year and Allco Equity Partners (AEP) is run by former Macquarie Banker Peter Yates.
The best way to assess how the new $3.5 billion of Qantas equity is travelling will come from watching the AEP share price because it is investing almost $1 billion but has no double dipping motivation.
AEP shares are down 1c to $4.30 this morning and remain well shy of their issue price of almost $7. The stock also dropped 6c yesterday on a day when Macquarie soared $1.33 and Allco Finance rocketed 59c. Says it all really.
Crikey is committed to hosting lively discussions. Help us keep the conversation useful, interesting and welcoming. We aim to publish comments quickly in the interest of promoting robust conversation, but we’re a small team and we deploy filters to protect against legal risk. Occasionally your comment may be held up while we review, but we’re working as fast as we can to keep the conversation rolling.
The Crikey comment section is members-only content. Please subscribe to leave a comment.
The Crikey comment section is members-only content. Please login to leave a comment.