The Australian’s John Durie has today pointed the bone at Cairns pub mogul Tom Hedley as the next possible victim of the global credit crunch.
Hedley made his fortune building a pubs and pokies empire that he sold to Coles Myer for $328 million in June 2006, although only $131 million of this was cash. However, the former plumber has blown much of that by paying stupid prices attempting to build another pub empire.
He retrieved $126 million from the public when 45% of Hedley Leisure & Gaming was floated at $3.50 a share last August but the stock plunged 37c to 93c yesterday after releasing this statement about its $850 million debt.
Such a 28% fall has scored Hedley a place on this rapidly growing list tracking “the greatest share tanks in history”. In that now all too familiar death dive, the stock has gone into a trading halt this morning.
Sure, closing out some interest rate swaps for a $45 million profit raises cash, but it smacks of desperation and the Hedley fund is now brutally exposed to soaring global interest rates. It will need to screw even more out of its problem gambler client base to survive – just as smoking bans and Kevin Rudd loom as major threats to earnings.
Hedley also owns 20% of the debt-ridden National Leisure & Gaming. I was stupid enough to buy 1,340 shares in NLG at 37.5c each last June in the hope of asking former Brownlow medallist and Essendon Premiership captain James Hird some questions in his role as a director.
Alas, Hird has since resigned and my $500 investment is worth $41.54 with the stock at 3.1c in morning trade. You’d do better playing some of their slot machines!
Durie reports that Hedley is in dispute with Wesfarmers over the terms of their lease arrangements on some of the pubs in the funds, which is a little surprising given the jingoistic way that Hedley backed Wesfarmers ahead of any foreign private equity barbarian during last year’s Coles sale process.
Just like Allco, Hedley didn’t realise the world had changed and just kept doing deals. How stupid was he, attempting to negotiate the purchase of another eight pubs for $56 million in late January?
We are now seeing arguably the world’s greatest fire sale. The cost of credit has soared and its availability is scarce. Therefore, asset prices sales are plunging and commercial property is at the epicentre of Australia’s problems.
We’ve already seen a shopping centre giant in Centro collapse, along with Australia’s second biggest hotel company Stella. The world’s biggest child care centre operator sailed close to the wind and now it’s the turn of our biggest listed specialist pub play.
Who will be next?
Check out the growing list of companies in the $100 million loss club.
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