The stockmarket is up again this morning but Qantas shares slumped 7c to a four month low of $4.99 as hedge funds sprint for the exits to cover their impending losses when the $11 billion Airline Partners Australia bid inevitably falls shorts of the 90% minimum acceptance condition.

You have to feel a little bit sorry for Macquarie Bank, which is staring down the barrel of a $30 million hit after agreeing to meet the expenses of all the other APA bid members. Then again, Alinta has gone into a trading halt this morning and some are tipping Macquarie Bank’s $10 billion bid will get up, which might explain why its shares are up 42c to $82.17 this morning.

The Millionaire Factory clearly blundered by not going for a Qantas scheme of arrangement which only requires approval from 75% of shareholders. They did this because schemes also require approval from 50% of all shareholders and the bidders feared that unions could have run the equivalent of a branch stacking campaign to vote the bid down. There’s an argument that using schemes on takeovers is against the law, but ASIC has turned a blind eye to this practice on numerous deals including Rebel Sport, Flight Centre and Repco.

Ironically, the Qantas bid is doing quite well with small investors given that more than 50% of all shareholders have accepted the offer. Today’s ownership update shows APA has lifted its stake from 27.91% to 30.06%.

APA has released a statement to the ASX today stressing that Andrew Sisson’s Balanced Equity Management is merely one institutional shareholder. They still might get more than 80% but 90% for compulsory acquisition will be very tough.

This is where life gets very tough for Macquarie because the $10 billion-plus debt package is conditional on the new owners having access to the Qantas cash flow. The 1980s equivalent of this Qantas bid was John Elliott’s debt-funded privatisation raid on Foster’s in 1989 and it was the lack of access to the cash flow which eventually sent his bid vehicle Harlin to the wall.

Bob Mansfield has previously revealed that fees to the banking syndicate are much bigger than any fees that will go to Macquarie Bank and the others working on the equity side of the Qantas deal and if it has to be renegotiated, the interest rate will be higher due to market movements. And that just further cranks up the risk.