The great global margin call, fire sale, deleveraging – call it what you will – took an interesting twist overnight when a family touted as billionaires emerged much diminished after a voluntarily sell down.
Pat Goodman, the Kiwi baker from Motueka, made his original pile as one of the founders of food group Goodman Fielder. He then got into funds management and industrial property through a joint venture with Macquarie Bank that was run by his son, Greg Goodman.
When Goodman Group shares peaked at $7.60 in February 2007, the family’s 144 million shares were worth $1.1 billion. However, now we learn that this was supported by an excessive $288 million in margin loans.
When the stock hit a low of $3.60 before Easter, the family’s gearing ratio was pushing 56% but the market was not informed and margin calls were clearly getting close.
The family then took advantage of the post Easter bounce but was last night forced to cop a hefty discount by selling 78 million shares – 54% of the holding – at just $3.70 each, even through the stock closed yesterday at $4.19.
Goodman shares slumped 13c to $3.96 today, meaning the family’s residual 66 million shares are worth just $261 million, but at least it is debt free. They now also suffer the ignominy of no longer being the largest shareholder of the company that bears their name, instead sitting behind the likes of Commonwealth Bank, AMP, ING and even Macquarie, which re-emerged last month with 5% held through its funds management arm.
This must have left a bitter taste in Pat Goodman’s mouth when you consider that the family geared up to buy more shares from Macquarie Bank when it sold its 7.7% stake for $730 million in August 2006.
The Millionaires’ Factory fetched $5.90 a share and proudly declared a pre-tax profit of $300 million, which shrunk to just $90 million in net terms because of the bank’s excessively generous bonus system. The way Macquarie carved up this Goodman profit was at the heart of last year’s protest against its remuneration report and the subsequent change to a new system.
Interestingly, Goodman Group is still chaired by Macquarie Group chairman David Clarke, who let everyone down by not disclosing the size of these loans.
The Goodman family now join this fast growing list of directors who are dumping stock to pay down debts.
What happened overnight raises questions about other Rich Listers. Gerry Harvey, Kerry Stokes, James Packer and even Rupert Murdoch are yet to reveal the debts they carry. This will be the first question asked at many AGMs in the coming months.
Today’s Mayne Report video sledges Macquarie and lauds the China-centric Rio Tinto annual report.
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