BUSFIN – An Australian BUSiness & FINance News Blog

Airbus Cuts A380 Production As Airlines Clip Fleet Numbers

Posted by Josh Mathews on May 7, 2009

A Qantas Airbus A380 Picture Courtesy: BLOOMBERG

BLAMING the global financial crisis, Airbus has cut its planned production of 18 super – jumbo liners, to 14, following airlines’ clippings to fleet numbers, in response to the current economic climate.

Airbus’ announcement of cuts to their production of A380’s, comes only a month after BUSFIN’s reporting on Qantas’ plans, to defer the delivery of four of their Airbus A380’s, and only two months after announcing their forecasted production, of 18 A380’s this year.

“Customers approached us and we are adapting our schedule to their needs,” Airbus Spokesman Stefan Schaffrath said.

Despite Airbus in October 2008, announcing their plans to shelve an increase in production this year, Mr Schaffrath said the new reduction was solely due to a drop in customer demand, and not due to manufacturing issues, which have previously plaugued the super – jumbo since its first flight in 2005.

Meantime, Airbus has said it plans to deliver more than 20 A380’s next year, having previously not announced a forecast. However, Airbus’ cutbacks to production of the super – jumbo, follows a string of production cuts on smaller models, and US rival Boeing, and Brazil’s Embracer, as airlines worldwide are increasingly seeking refuge, in dealing with a dramatic decrease in demand for flights.

Amongst Airbus’ cutbacks announced, plans to cut deliveries of its popular single asile models to 34 plans per month, from 36, were declared in February, and no assurance was given, whether further cuts were likely to be made.

In a statement from Airbus however, it reiterated plans to deliver roughly as many planes overall this year, as it did last year, when it produced a record level of 483 jetliners. The statement meanwhile, said that the reduction in the production of A380’s, will have no significant impact on ebit, or earnings before interest and taxes this year.

Also affected by the ‘domino effect’ of the global financial crisis, Airbus’ main competitor Boeing, has said starting from mid 2010, it will cut production of its large 777 model, to five planes from seven per month. Earlier this year, Embracer announced production cuts as well.

SOURCE: The Australian


Posted in General, International Finance News, National Finance News | Tagged: , , , , | Leave a Comment »

France Battles EU For Stricter Hedge Fund Legislation To Be Passed

Posted by Josh Mathews on May 7, 2009

European Union Flag

DESPITE Sweden’s warnings that even the tightest regulations are no guarantee a repeat of the current financial turmoil isn’t possible, France has called on member nations of the European Union, to adopt stricter rules on hedge funds. 

Much tougher rules should be insisted on for hedge funds, and other investment vehicles, by European Governments, than those previously proposed and discussed last week by the European Commission, according to France’s Finance Minister Christine Lagarde.

“The Commission’s proposal is way below the demands that Europeans should have. It is regulation at its minimum. We need to have a maximalist position at the start,” Ms Lagarde said at a meeting of the European Union’s 27 National Finance Ministers in Brussels.

Mandatory registration of managers of alternative investment funds, selling to professional investors in the EU, has been suggested by the Commission, however there are exceptions for managers of very small portfolios.

Objecting to proposals that would allow offshore funds to be marketed across the EU, providing conditions were met, Paris has intervened in the hedge fund debate. The problem being, France sess this as a concession, with the Commission proposing that these provisions be delayed for three years. Not only, France views these provisions as too timid, contrasting the views of many financial insititutions in the City of London, as too far reaching.

“The proposed benefits for unencumbered cross border marketing of funds is not sufficient to outweigh the burden of compliance,” Julian Young, lead partner at Ernst & Young’s hedge fund practice in London said.

Criticising the legislation, the Head of France’s private equity fund AFIC, Pierre de Fouquet, said the directive would:

“Inevitably generate a costly bureaucracy… As well as clogging up regulatory authorities without achieving any benefit for society.”

Sweden will assume the European Union’s rotating presidency on July 1st, and will chair negotiations on regulatory issues for the following six months. This is despite Sweden’s centre right Government, making it clear it was sceptical extra rules for hedge funds and other lightly regulated investment activites, would eliminate financial market instability. While in favour of more effective regulation, Anders Borg, Sweden’s Finance Minister said:

“It’s important to regulate the unregulated sectors like hedge funds and private equity, but we should not be naive. Eventually we will see the same kind of events happening again, though maybe not of the same magnitude.”

Believing the era of the Anglo – American deregulation is discredited, France and Germany believe the task now, is to impose tough standards on the areas of the financial markets, where unregulated activities led to excessive risk.

In an attempt to make financial markets safer, it is expected lawmakers in the European Parliament will support a new legislation, forcing banks to retain 5 per cent of the securitised products they originate and sell.

Being an issue that only really affects member nations of the European Union, the above matter was pretty much unheard of on the shores of Australia, not affecting Australians. With that said though, the coverage in the international media was very widespread, particularly in France, whom are leading the charge for tougher legislations against Hedge Funds in the European Union. The Financial Times which I used as my source for this comment blog, presented what I believe to be a very fair report, representing both sides of the argument, and critiquing France’s ideal that tougher legislations are needed.

It’ll definitely be interesting to see how this issue pans out, especially in terms of how the issue is covered in the international media, and if it is covered in the Australian media at all, and if France actually get their way with their want for tougher legislations, with Sweden assuming presidency, and consequently chairing the negotiations, with the view even the toughest and tightest regulations won’t guarantee financial stability, SO… I guess we’ll all be watching this space!

SOURCE: The Financial Times

Posted in General, International Finance News | Tagged: , | 1 Comment »

Germany Renews Calls To ‘Buy Global’, As The Country Braces For Dramatic Shrinkage Of Economy

Posted by Josh Mathews on April 30, 2009

German Finance Minister Peer Steinbrück, and German Economics Minister Karl-Theodor zu Guttenberg, met before a cabinet meeting in Berlin Wednesday to discuss the economy.

GERMANY’S export levels have slumped to unprecedented levels, with the government going into damage control on Wednesday, predicting a 6 per cent contraction in its economy this year.

Only last month, BUSFIN reported on Germany’s Economics Minister Karl – Theodor zu Guttenberg’s accusation of America becoming protectionist, through their ‘Buy American’ clause in their stimulus package.

“I fear the ‘Buy American’ clause could serve as a bad model for stimulus packages in other economies,” Mr zu Guttenberg said last month.

Not only, BUSFIN also reported last month, on Mr zu Guttenberg being forced to defend the German Government’s handling of the economy, and its attempts in stimulating it, despite his arguements of Germany setting a better precedent with its stimulus package, than the United States:

“… frankly I do not find this criticism justified,” he said. “We paid very close attention in our own stimulus programme to ensuring it does not give preferrential treatment to domestic suppliers.”

Supporting Mr zu Guttenberg, German Finance Minister Peer Steinbrück today argued the German economy was still well placed in weathering the economic and financial storm, due to numerous structural changes and investments in infrastructure.

However, conflicting reports have today meanwhile emerged, with confirmation Germany will suffer a severe contraction this year, with more than 40 per cent of the country’s gross domestic product generated by exports, and Mr Steinbrück’s expression of his concern of it being:

“…the worst recession since the Second World War.”

At the same time, German policy makers have been forced to play down claims by the media, that they’re in the process of developing a third stimulus package.

In an attempt to lessen the blow of today’s prediction of a 6 per cent contraction of Germany’s economy this year, Mr Steinbrück warned that the other 16 countries in the euro zone may not be able to stay competitive as the downturn progresses, and that disparities would sharpen.

“We are worried about other countries loosing their competitiveness within the euro zone… This is likely to have negative results,” Mr Steinbrück said.

Mr Steinbrück’s warning coincides with growing worries of recent months, about the economic position of both Italy and Greece.

The news is doom and gloom for Germany, with the country also forced to slash its forecasted gross domestic product levels. Only three months ago, the German Government forecasted a gross domestic product contraction of 2.25 per cent, however that prediction today looks optimistic. Berlin has since suffered from a dramatic decrease in demand for its products as spending is reigned in, by foreign consumers.

The International Monetary Fund last week suggested a decline of 5.6 per cent this year, worse than that of any other advanced economy, with the exclusion of Japan, which the IMF forecasted would shrink, by 6.2 per cent.

Considering one of the world’s largest exporters has had to slash their forecasted gross domestic product levels, due to a dramatic decrease in exports, and with reports that Germany will suffer a severe contraction worse than any other developed country and advanced economy, the coverage in the media has been relatively poor. Absolutely, the coverage in German media has been extremely widespread, as has it been in the United States, who too are deeply affected by the global economic downturn, but this matter has been poorly covered, when and if covered in the Australian domestic media.

Overall, the coverage has been far too optimistic, as the solid facts need to be told, without sensationalism getting lost in translation, which has been the case. The fact is the International Monetary Fund has predicted Germany will suffer a contraction of 5.6 per cent, whilst German Finance Minister Peer Steinbrück has been reported as expressing his concern Germany will experience the worst recession since the Second World War.

At the same time though, the German Government has unnecessarily copped alot of flak from the international community, with German Economics Minister Karl – Theodor zu Guttenberg having to defend his, and the government’s actions and decisions. Mr Theodor zu Guttenberg purely warned of his fears other countries would become protectionist, if they followed on suit from the United States, with their ‘Buy American’ clause in their stimulus package. Which, in my view is fair enough, coming from a country whose exports account for 40% of their gross domestic product. With that said though I must note, The New York Times which I have used as my source for this reflective blog post, presented a balanced view, without bias, despite being an American newspaper.

SOURCE: The New York Times

Posted in General, International Finance News | Tagged: , , , , , | 1 Comment »

AristocratSX Review

Posted by Josh Mathews on April 23, 2009

TRADING of Aristocrat securities is officially under review by the Australian Stock Exchange, following yesterday’s profit warning, and share placement by the poker machine company.

Taking extra precautions, and calling for calm, stating the review is nothing out of the ordinary, and is a scheduled review, a spokesman from the ASX said:

“We will conduct our normal review of trading, which we do as a matter of course.”

However, if the review conducted by the ASX reveals uncertainties, and / or shady and suspicious trading, Aristocrat may be required to disclose when they were aware of the price sensitive information, and / or the matter may be referred to the Australian Securities and Investments Commission for consideration for further review.

The Australian Securities and Investments Commission remained unphased by the ASX’s claims yesterday, declining to comment, but readvising it wasn’t investigating, or won’t investigate the case. Meantime, Aristocrat representatives weren’t available for comment.

Aristocrat’s shares were halted at $3.98, before management announced it would raise at $3.25 a share, $200 million. Warning of a dramatic plunge as much as 44 cents in first half profit, due to weak demand, the company announced it’s completion of the capital raising on Tuesday morning.

Despite the Australian Securities and Investments Commission’s refuting of claims that they’re not investigating a matter concerning Aristocrat forwarded on by the ASX, they are reportedly looking into the day prior to the company’s completion of its capital raising project, of an increase in the short selling of Aristocrat shares.

Significantly higher than in the previous week, was the company’s turnover traded by short sellers on Monday, at 51 per cent, according to the ASX’s website.

SOURCE: The Australian

Posted in General, International Finance News, National Finance News | Tagged: , , | Leave a Comment »

Students Pay Price Of Ignorance, As Global Financial Crisis Costs Dearly

Posted by Josh Mathews on April 17, 2009

AS BUSFIN has previously reported on how the global financial crisis is having a domino effect, affecting not only businesses and people in ways never experienced before, it has now been revealed by leading American newspaper The New York Times, that student loans are becoming a costly burden in the grim job market the world is currently in, due to the global economic downturn.

It has been revealed that thousands of recent graduates have been either unable to find jobs, or are earning too little to cover the payments for loans that are sometimes as high as $50 000. Noteworthy is that student loans are ironclad debts, and cannot be easily renegotiated, like with child support, alimony, and overdue taxes.

“You often hear the quote that you can’t put a price on ignorance. But with the way higher education is going, ignorance is looking more and more affordable every day,” Ezra Kazee, a graduate of Winona State University in Minnesota, who has a $29 000 student debt said.

However, Mark Kantowitz publisher of FastWeb.com and FinAid.org, has warned against being ignorant, stating that students will pay the price for doing so, and recomended students follow a simple rule of thumb:

“Do not borrow more than your expected starting salary for your entire undergraduate education,” he declared. “If your starting salary is going to be $40 000, then you should borrow no more than $10 000 a year for a four year degree.”

Mr Kantrowitz’s warning comes after estimates have exposed the fact that an estimated 1.8 million, or about two – thirds of college graduates have an average cumulative debt of about $22 500, in dealing with ever rising tuition and room board.

As the graph shows, the average debt of senior graduates has risen consecutively over the last two decades

According to preliminary data from the Education Department, federal student loans in the US are at their highest rate since 1998, at 6.9 per cent. This figure though, doesn’t include those loans deferred or forbeared.

Students are being warned of the consequences of overlooking graduating with debts that are likely to exceed their starting salaries, and are being reassured there is always ‘other options’, if they’re experiencing troubles repaying their loans.

“The good news on the federal loan side is that there are a lot of options for borrowers, particularly those who are in shorter term financial trouble now,” Director of the National Consumer Law Centre’s Student Loan Borrower Assistance Project, Deanne Loonin said. “The private loan side is where we don’t have or are unable to give a lot of general information because there just aren’t as many rights,” she said.

SOURCE: The New York Times

Posted in General, International Finance News, National Finance News | Tagged: , | Leave a Comment »

Flying Kangaroo’s Wings Clipped

Posted by Josh Mathews on April 17, 2009

Qantas LogoFOLLOWING on from Qantas’ announcement of numerous cutbacks on Tuesday, the airline still maintains they they’re now especially, one of few international airlines able to ride out the global financial crisis, to its fullest extent.

However, Qantas’ credit assessment was downgraded by leading ratings agency Standard & Poor’s, from BBB+ to BBB, after the airline slashed their forecasted full year profit of $500 million, to $100 – 200 million before tax, following a massive downfall in international travel. International visitor arrivals in the first two months of this year were down approximately 3 per cent, driving for only the second time since the airlines’ shares were floated 15 years ago, into the red.

“We have no choice but to lower our profit forecast and make major changes o ensure Qantas can weather the current commercial environment,” Cheif Executive Officer Alan Joyce said. “Qantas revenues have come under severs pressure, so it would be irresponsible to rely solely on stimulating demand through attractive pricing, given the potential for unprecedented reductions in yield.”

Although, fellow ratings agency Moody’s assessment of the airline remained steady, having already been downgraded from Baa1 to Baa2, earlier in February this year. Despite Standard & Poor’s downgrade of the airlines credit rating, arguing Qantas was still left with an investment grade credit rating, an airline spokesman said:

“We are one of only three airlines in the world [Qantas, America’s Southwest Airlines, and Germany’s Lufthansa] with investment grade credit ratings. Despite the downgrade, which is disappointing but hardly surprising, our aircraft financing facilities are finalised until October 2009, and we have a strong balance sheet, with $3 billion in cash.”

Declaring Qantas’ decision to axe up to 1 750 jobs, cut back on flights, ground 10 planes, and delay the delivery of its next generation of jets as necessary, Mr Joyce said:

“We are experiencing significantly lower demand, particularly in premium classes, and considerable price pressures with extensive sales and discounting by all carriers.”

Qantas pilots and cabin crew are expected to be the prime targets of the airlines job cutbacks, of 1 250 workers, and 500 managers from its 34 000 strong workforce. Meanwhile, there will be a further 5 per cent reduction in flying capacity on Australian domestic routes, which are expected to be the worst hit, and international routes to the US, Britain and South Africa, with the tourism industry now believing a forecast of a 4.1 per cent drop this year, could be optimistic. Bad news for Qantas then, with Ms Zhong, a Standard & Poor’s Credit Analyst, not ruling out another future downgrade of Qantas’ credit, stating:

“… Our view that Qantas’s financial profile will come under significant pressure from the significant deterioration of trading conditions in the airline industry. A further rating downgrade could occur if the industry downturn deepens.”

Although, a Moody’s Senior Analyst, Ian Lewis, argued a stable outlook for Qantas in the near future, stating:

“[the airlines financial profile]… should remain manageable within the rating at this stage of the economic cycle, unless global and domestic conditions deteriorate more sharply… than currently anticipated.”

Seeking to protect as many jobs as possible, both Mr Joyce, and the Transport Workers Union will endeavour to minimise the number of jobs lost, through attrition, redeployment throughout the Qantas group, leave without annual pay, annual and long service leave, the promotion of part time work, and exploration of job sharing.

Aviation analysts were mainly positive in their assessments of the tough cost cutting program announced by Qantas, including the deferrment of four Airbus A380’s, and the negotiation about reducing its scheduled purchase of 15 787 Dreamliners, to 12, with Boeing, and applauded Qantas’ goal to slash capital spending by $1 billion, by June next year.

The medias coverage of Qantas and on the issues reported above, was extremely widespread in both the Australian domestic media, and international media, and in all forms, predominantly newspaper and television. As Qantas is Australia’s only airline aside from Jetstar, a subsidiary of Qantas, and is a major player in the global arena, with thousands of people worldwide at stake, having a 34 000 strong workforce, the medias reporting of Qantas was even more widespread and critical than any other Australian transnational business.

The reporting of Qantas meantime, was unfortunately by some media institutions particularly negative, with many spelling out the end for the airline, through their reporting on Qantas’ slashing of their forecasted profit levels, and announcement of enormous cutbacks. However, what we all must keep in mind, is that whilst Qantas have slashed their forecasted profit by some $300 – $400 million, they are still in surplus, and NOT deficit, which by any measure, under such circumstances and under severe pressure, is a good thing, especially during this global economic downturn, which many argue is just as bad, if not worse than the Great Depression of the 1930’s. At the same time, the other thing to remember is that this is the reason for CEO Alan Joyce’s cutbacks, in order to keep the airline from bankruptcy, which I believe is a message many media institutions held off on.

The Australian though, which I used as my sources for this comparative blog, presented what is in my view, a very fair and balanced report, telling it how it is to their readers, and painting a picture of both sides of the story. Presenting quotes from a credit analyst of leading ratings agency Standard & Poor’s, as to their reason behind their downgrade of Qantas’ credit assessment, and also from fellow ratings agency Moody’s, who too downgraded their assessment of the airline earlier in the year, but whose remains steady for the time being, despite the numerous cutbacks and slashing of forecasted profit levels announced by the airline.

It is noteworthy the difference a day makes in the media, with The Australian’s report on Tuesday 15th April 2009 outlining the reasons for Qantas’ announcement their cutbacks, and slashing of their forecasted profit levels. In The Australian on Wednesday 16th April 2009, the report backtracked, and expanded on its previous report the day prior, outlining in greater detail the cutbacks announced by Qantas, and its potential implications on numerous stakeholders worldwide. This is as the report was to reveal leading ratings agency Standard & Poor’s announcement of their downgrade of the airlines’ credit assessment, which they stated was due to the slashed forecasted profit levels.

SOURCES: The Australian 15th April 2009, and The Australian 16th April 2009

Posted in General, International Finance News, National Finance News | Tagged: , , , , , , , , , | 1 Comment »

A Bright Light For Consumers Shines, As The End Of The Financial Tunnel Nears

Posted by Josh Mathews on April 14, 2009

AUSTRALIA may avoid the worst of the global financial crisis, thanks to a dramatic rise in consumer confidence, and the return of buyers to the housing market.

Consumer confidence in Australia is back to almost normal levels, while housing finance is clawing its way back, towards the mid 2007 record.

Westpac Senior Economist Matthew Hassan, said consumer confidence surveys in all countries fell sharply from the middle of last year to last October, and while other measures in other nations have continued to slide, there have been modest gains over recent months in Australia.

“We stopped short of falling into the depths of despair,” Mr Hassan said.

Consumer surveys in the US, Britain, Japan, and Europe, are all at extreme lows never experienced before, with Mr Hassan distinguishing the big difference between Australia and other countries, being the strength of our banks, and the fact consumers have enjoyed the benefits of lower interest rates.

The Westpac – Melbourne Institute’s consumer sentiment survey recorded an 8.3 per cent increase over the past month, with the index measure of 92.7 points fast approaching the long term average mark of about 100.

Banking systems in other countries have been in distress, and there has been no reduction in interest rates to either consumers or busineses.

With the rise in consumer confidence being seen in Australia, defing the trends set globally, it has been hailed as the saving grace by Reserve Bank Board Member, and Australian National University Professor Warwick McKibbin, in avoiding the worst recession in our country’s history, arguing:

“You get a massive wiping out of your economy if, in fact, your consumers stop spending. In the US and UK, we have a financial crisis; in other countries, we are faced with falling exports and a collapse of international trade, but really what’s hurting countries is the loss of domestic confidence.”

However, the rally in share markets, the government stimulus package, and the fall in mortgage costs have all been credited for the revival of financial markets.

The news isn’t all good though, with Reserve Bank Governor Glen Stevens earlier this year, warning at a House of Representatives Economics Committee, that the Reserve Bank would be forced to reverse direction, and increase interest rates, when consumer confidence and growth had recovered:

“If there were a sudden return to confidence and growth, policy would have to get out of the way of that smartly,” he said.

Ahead of the Reserve Bank’s meeting next month, financial markets are sharply pairing their expectations for further rate cuts, putting only a 75 per cent chance of a 25 basis point rate cut. Markets yesterday, were trading on the basis that a cut of at least 25 basis points at the next Reserve Bank meeting was certain, and a 50 point cut was likely, before the release of positive consumer sentiment and housing figures were released.

Whilst this may come as good news to many, that there are signs starting to show, that the global economic crisis is starting to back down, this good news unfortunately brings with it, the prospects of higher interest rates. Away from the technical side of things, but still on that note, the coverage of such issues regarding the global economic crisis in the media, has as a whole been extremely good, due to its extensiveness being such a major financial issue. However, some media organisations have downplayed the global economic crisis, whilst others have overhyped the situation, striking the right balance, and presenting a very fair picture is The Australian, which I have used as my source for this comment blog. The Australian has presented a very clear and concise report, telling their readers exactly what the situation is, without sheer and unnecessary sensationalism, and in turn, in a way understandable to most, if not all Australians.

SOURCE: The Australian

Posted in General, International Finance News, National Finance News | Tagged: , , , , , , , , , , | Leave a Comment »

Business Loans Hit Hard By Global Financial Crisis, ABS Reveals

Posted by Josh Mathews on April 14, 2009

LENDING commitments to businesses fell to a 42 month low in February, to 14.7 per cent.

Figures obtained from the Australian Bureau of Statistics, reveal the seasonally adjusted figures confirm the downtrend in business commitments. Begining a deep decline in the early months of 2008, at $25.1 billion in February, commitments were down 43.4 per cent, or $19.2 billion per month, from a year before.

Compounded by a marginal fall of 0.2 per cent in personal finance commitments, was in February the weakness in business lending, down by 11.5 per cent ($840 million per month), from the previous year.

Whilst finance commitments were down by 7.7 per cent in February, to their lowest levels since October 2005, secured lending for home purchases or additions, rose by 2.8 per cent.

As the global financial crisis continues to thrive, the reduction in lending could potentially increase, as demand by households and businesses for loans continues to significantly drop. Meanwhile, tighter lending practices adopted by lending institutions, either hit hard by the economic downturn, or whose clients are severely affected, and in turn are unable to repay their loans, has also been cited as another possible reason behind the decrease in loans.

However, the National Bank of Australia’s monthly business survey revealed, 26 per cent of respondents had experienced tougher availability of credit in February, though, in a signal things may be improving, that proportion fell to only 18 per cent in the following month of March.

SOURCE: The Australian

Posted in General, National Finance News | Tagged: , , , , | Leave a Comment »

Tensions Skyrocket As Allco Finance Group Fleet Battle Continues

Posted by Josh Mathews on April 3, 2009

NEVER before has the attempted selling of a company’s assets, been so difficult to pursue, than Allco Finance Group’s battle over the selling of the aviation arm, of the stricken leasing firm.

The fiesty battle between Allco Finance Group Receivers Steve Sherman and Peter Gothard, and Former Allco Executives David Veal and John Kinghorn, continues despite a two month set back, caused by the Former Executives’ raising of legal title issues, over the sale of the firm’s fleet of 68 aircraft.

The ongoing battle involving Allco Finance Group Receivers, and Former Executives, is such that as Allco Australian Holdings Ltd (AAHL), is not a subsidiary of the stricken Allco Finance Group, currently in receivership, Mr Veal and Mr Kinghorn, have title to the aviation arm of the firm.

Making it clear to potential bidders, that they had complete legal control over the process, Mr Kinghorn on behalf of the Kinghorn Foundation, recently sent out letters, stating:

“We understand that at some time you may have been involved in the sales process of the Allco Aviation business,” Mr Kinghorn wrote. “We are unaware if you are still interested but would like to provide the following information:

A) We attach a copy of a letter sent to the receivers on March 9th.

B) The consent of the Special Purpose Vehicles referred to in the letter is requried for the novation of each of the management and remarketing agreements and also the appointment of a new manager.

In this regard we would expect that the decisions of the Special Purpose Vehicles respective directors as to the granting of these consents will be taken at their sole discretion and determined strictly in accordance with the best interests of their respective companies.

C) The Kinghorn Foundation is a debt participant in the financing of a number of aircraft. The consent of the foundation which can be exercised at its absolute discretion will be required for the appointment of any new manager to those aircraft.”

Meanwhile, Mr Sherman last night said:

“We’ve got some excellent assets in Allco’s aviation portfolio and we have genuine interest from potential buyers. While the Veal / Kinghorn issue has been a distraction, I am confident we will be able to finalise a sale on commercial terms.”

Ferrier Hodgson, Mr Sherman’s insolvency group, originally nominated a January 21 closing date for expressions of interest.

“Over the next 10 years, the business is contracted to receive cash flows of approximately $US15 million per annum from its equity investments in the fleet, and its management fee entitlements, which provide high cash flow visibility and earnings resilience. The business is projecting cash receipts of approximately $US21 million for the year ending June 30, 2010,” the document says.

Published before the company’s demise in November last year, Allco’s aviation business’s 2008 Shareholder Review, revealed the firm had 21 new aircraft on order, to be added to the fleet by the end of 2011.

Only two years ago, Allco was part of the failed takeover bid of Qantas, having an economic interest in aircraft, especially in 31 of AAHL’s 68 aircraft, despite the aviation firm having complete legal title and control over the entire fleet. Meantime, Allco manages and leases a number of aircraft used by airlines including Qantas, British Airways, Jetstar, SilkAir, and Ryanair.

It is believed Mr Kinghorn’s Foundation is responsible for the financing of Mr Veal’s AAHL company, to which he is the sole director and shareholder, by getting a seat at the table, having bought debt owed to his firm. At the same time, a company associated with Mr Kinghorn, is also understood to have been a bidder for Allco’s aviation business.

However, it has been reported by trade publication Airfinance, that the two frontrunners BOC Aviation, owned entirely by the Bank of China, and New York based Bravia Capital Partners, knocked Mr Kinghorn’s company out of the bidding arena.

SOURCE: The Australian

Posted in General, International Finance News, National Finance News | Tagged: , , , , , , , , , , , | Leave a Comment »

Hedge Fund Pushes For Chopping Of Babcock & Brown

Posted by Josh Mathews on March 27, 2009

Picture Courtesy: Bloomberg and The Australian

BABCOCK & Brown Wind Partners may be forced to wind up their ownership of the global wind farm, as well as sell its assets, under a proposed plan submitted by their largest shareholder.

The calls came as the Children’s Investment Master Fund, a UK based hedge fund, which holds more than 14 per cent of Babcock & Brown, led the charge for a change in name, to Infigen Energy. Part of the Children’s Investment Master Fund’s proposal, includes plans for the fund to sell its non core assets in Germany and France, and for the market of its remaining wind farms in the US and Australia, to be tested for future sale.

Dismissing the proposal, directors of Babcock & Brown Wind Partners welcomed the views of their largest shareholder. Meanwhile, all shareholders of Babcock & Brown, were advised in a meeting in Sydney on April 29th, to vote on a change in name, and also on an appropriate equity scheme for employees, as they seek to separate themselves from its former parent company, currently in administration.

Stating the completed sale of the firm’s Portugese and Spanish wind farms has placed Babcock & Brown in:

“… [a] strong financial position,” Babcock & Brown Chairman Graham Kelly meanwhile said, the firm’s directors “… agree with TCI that the current BBW security price does not reflect the underlying value of BBW’s wind energy business.”

The establishment of an in house wind farm is currently underway, to develop and improve the company’s asset management capability, through an onmarket security buyback sheme. The true value of the firm should in turn be revealed through the development of these functions, allowing for:

“… [a] more accurate reflection,” according to Mr Kelly, despite conceding “… whilst equity markets remain dislocated and volatile, valuation gaps may persist.”

SOURCE: The Australian

Posted in General, International Finance News, National Finance News | Tagged: , , , | Leave a Comment »