Allco Bust

[WynSock]

From the ABC...

ALLCO placed into voluntary administration (http://www.abc.net.au/news/stories/2008/11/04/2410297.htm?section=justin)


Har Har Har Ho Ho He He

Good one Goeffrey! You can pick em.

:}

[neville_nobody]

That was in the past and Geoffry doesn't want to talk about the past......:mad:

[wessex19]

how much did ALLCO offer for Qantas??? Understand tonight that they have entered voluntary administration with $660 million in the red:ouch:

[Sunfish]

Allco going into Administration conclusively tells you everything you need to know about the sheer lack of ability of the Board of Qantas and it's senior management.

If you ever have business to business dealings of any weight, of which the sale of your business is by definition the most weighty, the First thing you do is due diligence on your potential business partner.

I cannot for the life of me understand why QF entertained Allco's bid. Either everyone of its Board and Senior Management are just dumb ****s or they were blinded by dreams of money and/or power.

Look guys, anyone with half a brain can read a balance sheet. Anyone with half a brain can ask around about the reputation of the company and it's principle players. It's not particularly hard, and, considering the stellar talents supposely at the head of Qantas and the resources QF commands, it would have been easy.

Anyone with half a brain can also predict what a balance sheet will look like "after" a proposed transaction.

I have lost count of the number of beautifully dressed and softly spoken gentlemen, some with impressive qualifications from prestigious foreign Universities, who have whispered about wonderful transactions in my shelly pink ear. They even laughed at my jokes.

..But when a little due diligence was applied it invariably turned out that they either did not have two beans to rub together or the impressive institutions they claimed to represent existed as a post office box and a serviced office, or what they were proposing was illegal, or seriously to my disadvantage once the verbiage was stripped away.

The Allco deal stank from the outset. Thank your lucky stars it didn't proceed because by today you Qantas blokes and your suppliers would be praying for a Government bail out.

Come to think of it, you still might need one thanks to other stellar Board decisions like the A380 and Dreamliner.

[Sunfish]

Get out the violins and hankies. The Age has a bit on Allco today:



Allco: an investor's tragedy | theage.com.au (http://business.theage.com.au/business/allco-an-investors-tragedy-20081105-5hv0.html)

[QFinsider]

The deal as Sunfish alluded to stunk from the start.

For too long has slick finance speak been bamboozling many people. Old fashioned prudence was out of vogue. Perhaps the world economy going off a cliff as the shortcomings of the whizkids are exposed, will in time,ensure that transparency, accountability and prudence dictate the merit and ultimately the success of corporate financial decisions.

What astounds me is the complete lack of interest from the regulators.
It is the the correct application of regulation suited to the corporate environment that ensures compliance. Letting the foxes run the chicken coop has proven worldwide not to be a clever financial regulatory stance. It is time regulation at the big end of town was overhauled. They could start with the stinking pile of crap called APA/Qantas and the duplicity of all the protagonists..

[Cravenmorehead]

Isn't hindsight a wonderful thing

[404 Titan]

Cravenmorehead

I think if you go back and read the threads that were written here at the time, people were saying the same thing. Nothing has changed because they were right.

[Lodown]

I cannot for the life of me understand why QF entertained Allco's bid. Either everyone of its Board and Senior Management are just dumb ****s or they were blinded by dreams of money and/or power.


Hubris run amok.

[Tangan]

You may ask questions of due dilligence etc, but it was never anything more than the promised kick-back that Margaret Jackson and Geoff Dixon in particular, and the QF board in general, stood to receive upon consumation of the Allco deal.

Those parasites are prime eaxmples of the greed and selfishness that has driven the current worldwide financial mess.

[Jabawocky]

Ironically Green and Coe are long-time rivals. Then there are the bit players: the consultants, directors, lawyers, auditors - all soi-disant experts too - all with specks of blood on their hands. What did they do to protect these assets from blowing up? Zero in almost all cases; there were fees to be had.

Don't get me started....... THE root of all evil :mad:

[Jabawocky]

Back then, as is the private equity custom, the consortium of smart guys was to have ripped out all the cash and replaced it with debt, sacked people, generally slashed and burned costs for three years, then tipped the thing, skinned, back into the share market via a suavely PR-ed float with a glossy prospectus and compelling turnaround story.

The $11 billion takeover play was to have been financed with $10 billion in debt - ''covenant lite'' at that. And Allco was to have had the majority equity stake at roughly 30%. Or controlled the majority stake rather, after winning the bid, exploiting the airline as collateral to borrow, then spinning off their equity stake into a special vehicle which would have been called Allco Australia Aviation Fund or some such.


Gee this journo is good......... he probably searched all the old pprune threads on the topic from the archives ;)

Thanks Sunfish for the link, its made an entertaining read. I feel for those who got sucked in by this mob and the Mac Banks etc..... but these kinds of thieves eventually get what is coming to them.

I thought the system was tighter controlled after Bond/Skase/Connel et al.:rolleyes:

[ampclamp]

cant say I'm upset at the demise of AFG.But the top dogs there will be limited in their exposure and no doubt have done well out of the business model whilst finance, hence gearing was cheap.

Its the small shareholders and creditors that will be reamed.I do feel for them, I've been there with other listed companies.

I campaigned quite hard against the takeover from day one both in person, in writing to any politician who would listen (some did and from surprising places too) and on other online forums so there's no Mondays expert syndrome here.
I even bought qantas shares to vote it down.Made a few bob out of it as well as the share price travelled above the takeover offer for sometime after.

As for why they (the board et al) did it, well some I guess did so cos they likely saw it as a good price and initially it was, fact.

Directors are charged with looking after the firm in the interests of the owners.As the qantas directors/exec's seemingly were coaxed into actually releasing upgrade after upgrade to the profit the offer price looked less impressive.The fact the upgrades seemed not to be released in a timely manner was the subject of much concern from some big holders.

Others directors /exec's certainly had a huge ,indeed massive, incentive to convince the insto's and smaller holders.

A huge debt of gratitude to those big insto's who saw the light.Some of those holdouts were drummed out of their jobs for sticking to good conservative policy.

Whilst the share price is sick right now and some in the pro takeover camp no doubt are saying I told you so, not one of them I'm sure had any clue what would happen in the financial world a year or 2 later.

What some forget is that some insto's buy good companies who make real profits with real dividends so their clients have a source of income.If qantas were in the consortium's hands right now they would be lucky to service the debt let alone pay a divvie.
So, the SP is down but they continue to pay a divvie to holders and that is quite important for those investors who are not active traders.
They would have gutted the place looking for loose change anywhere.

Frankly I think its a disgrace the exec team and board held their jobs after it fell over.Their positions were untenable.The shareholders voted down something they clearly pinned their colours to and lost.
They should have had the guts and decency to stand down there and then.
It was in effect a vote of no confidence and most continued to reap the rewards of high office while trying to ream the workforce.Its the worst kind of hypocrisy.Do as I say not as I do.:mad:

[lowerlobe]

I thought the system was tighter controlled after Bond/Skase/Connel et a
That may have been the idea or promise but the reality is more of the same but on an even larger scale..Some of the guys at the top have no idea or concept of responsibility.

That's why we are in the mess that exists at the moment and of the almost obscene level of corporate remuneration which even now seems to know no end.

There are examples of banks in the US being bailed out then spending 100's of thousands if not millions of dollars on golden handshakes and corporate parties to celebrate...

The common line used by the 'suits' to justify their immense pay scales is that you get what you pay for...

Well we got it alright.......Economic meltdown

[kotoyebe]

BTW, welcome back Sunfish. Dare I say, I've missed your input around here lately!

[teresa green]

Now where is Brian Burke in all of this. :E Sad for the shareholders, no doubt the directors are half way to the Caribbean by now, with the lot in the wifes name. How come we could see it coming but the QF board did not? White collar crime has been committed, and nobody cares.

[Quill Shaft]

That was in the past and Geoffry doesn't want to talk about the past......

But look at the share price now.... Surely it was better for the shareholders
to sell to APA :ugh:

[speedbirdhouse]

Quote-

"Surely it was better for the shareholders to sell to APA "

________________

Even better for the senior executives :mad:

Who cares if it would have crippled, if not destroyed, the airline :ugh:

[OverRun]

A good article in the Age by Michael West. But surely he has been too gentle on the hedge fund manager when he says:
You can laugh now, it didn't happen, thanks to a suspicious hedge fund manager who refused to vote his stake at the eleventh-hour because he thought the deal promoters were lying to him when they pleaded they didn't have the numbers to get the requisite 50% to proceed with their bid. He held out for more in the mop up - which never came.

I’d rather use the words of Jennifer Hewett to remind us of how these people really operated. I don’t need hindsight to remember the almost-done deal – I was also saying it was crook at the time.

Giant bluff goes badly wrong, no hedging it

The Australian | Jennifer Hewett | May 07, 2007

AMERICAN billionaire Samuel Heyman woke up early Friday morning in the US to several frantic and incredulous phone calls. The most furious were from two giant US hedge funds.

The funds were beside themselves that Heyman had managed to scupper the entire Qantas deal by reneging on a mutual understanding. This agreement had been supposed to deliver just enough stock to get the bid across the line by 5am, New York time.

Not delivering on the deal was not in the script.

Yet there it was. A complete world-class debacle. Forget Qantas retail shareholders or the Qantas board or the passengers or staff or even angry Canberra politicians. This was all about the giant game of bluff played by international hedge funds for hundreds of millions of dollars in hard cash.

The belated appearance of 4.9per cent of Qantas shares from Heyman five hours after the Friday deadline was evidence of a desperate effort to fix up a massive bluff gone horribly wrong. It was all too late.

The problem was that Heyman tried to outfox even his peers in the hedge funds, only to end up ruining the whole big money game by accident.

Greed outwitted itself, wrecking reputations and Airline Partners Australia's $11 billion bid at the same time.

Now the Qantas board under Margaret Jackson is in crisis, the share market is in suspense and the bidding partners and funds are still desperately - and unsuccessfully - trying to salvage what they can.

"If this was an elaborate and cunning plan, it was straight out of Blackadder," says one insider.

Back in Sydney, the bidders at APA and the Qantas board were stunned by the failure to get to 50per cent of acceptances by the 7pm Friday deadline.

Over the previous several hours, repeated calls from the team at Macquarie Bank, led by Tim Bishop, had given no indication Heyman would not accept the bid, merely that he would delay as long as possible. Meanwhile, the great man was sleeping.

But Heyman was soon to be almost as stunned and dismayed as many in Australia. He had privately believed the deal would get through without him, no matter what those sharp boys at Macquarie Bank had warned.

He had seen them in action before, and he was sure they had 5 per cent more acceptances they weren't telling him about.

Otherwise all the hedge funds, including Heyman's own, stood to lose hundreds of millions of dollars. And that was a result an aggressive operator like Samuel Heyman certainly didn't want.

His own hedge fund held 10 per cent of Qantas, and two other funds, Polygon Investment Partners and Highbridge Capital Management, had another 10 per cent combined.

The agreement had been that, between them, they would each deliver 45 per cent to 60 per cent of their holdings - enough to just edge the deal over the 50 per cent minimum acceptance required by the deadline.

But Heyman didn't make all his money by playing fair over the past few decades. He had apparently been secretly determined to keep all of his Qantas holding. This meant he would have even more stock to keep trading over the following two weeks, trying to earn yet more millions by gaming the difference between the $5.45 offer price and the lower price available on the market.

With enough shares, even a few cents difference can translate into big profits.

Now, as Heyman belatedly understood all too clearly and the other two hedge funds were angrily reminding him, he had lost his bet big time. And it would cost them all dearly. Perhaps up to $1 billion, depending on what level the Qantas shares fall to.

"He was trying to be so tricky he caught himself coming back the other way," says a seasoned player.

Nor was it a simple matter to suddenly change the rules. APA, in shock and confusion, had put out a formal statement at 8.30pm Sydney time (6.30am New York) on Friday, saying the bid was dead.

At home in Melbourne, a bitterly disappointed Qantas chairwoman Margaret Jackson knew she was facing a brutal onslaught of criticism even if she had nothing to do with the fiasco of the bid's failure.

Her attempt to put what had seemed a generous offer to shareholders last December had ended in an unprecedented disaster, leaving Qantas at the mercy of hedge funds which apparently couldn't even manage their own financial trickery.

APA was just as morose. It had put the 7pm Friday deadline on precisely to bring to an end the continual meddling in the offer by the hedge funds. Now it had all exploded in their faces. No one could initially comprehend what Heyman's motive had been. They couldn't understand whether it was an accidental oversight, a deliberate strategy they didn't get - or a massive miscalculation. It turned out to be the last. But it didn't matter. The hammer had gone down. It was all over.

Back in New York, however, Heyman was hurriedly trying to turn back the clock. He was spurred on by his incensed hedge fund colleagues at Polygon and Highbridge.

Most of the hedge funds had bought in at about $5.15 a share. If the Qantas share price falls back below $5, they will have lost hundreds of millions of dollars.

They were determined that shouldn't be allowed to happen.

Heyman held about $1 billion worth of Qantas shares, 4.9 per cent in direct shares and 5.1 per cent in complicated derivatives. He sent acceptances for his 4.9 per cent worth of shares just before midnight Sydney time, meaning the bid was now just over the minimum 50 per cent required.

The various players at APA suddenly had to regroup, hurriedly trying to breathe life back into the corpse. They put together a second statement that was sent out just after 4am on Saturday. This declared that even though it "appeared" the offer had failed to reach the 50 per cent level required on Friday evening, "an acceptance from a large investor" subsequently would take it over the threshold. The statement said the bidders would apply to the Takeovers Panel to allow the offer to continue.

But APA's initial statement declaring the offer would not proceed had publicised and politicised the whole mess.

A hearing of the Takeovers Panel consists of three members drawn from a range of 38 part-time business, legal and academic experts. They were clearly unimpressed by the last-minute attempts to get the APA offer back on track.

"The circumstances of which APA has complained are in relation to a single sophisticated shareholder with a significant interest in Qantas, who should have been well aware of the closing time and date for the offer and of the implications of not meeting that deadline," the panel decision noted firmly yesterday.

APA is now applying for a review of that decision by the Takeovers Panel and the Australian Securities and Investments Commission. Few in the market believed last night that this desperate grab for a foothold had any chance of success.

The Qantas board held a grim meeting last night, ahead of putting out a statement withdrawing its support for any efforts to keep the bid alive. It's already been an almost unbelievable nightmare for an airline that likes to congratulate itself on being well run. But the nightmare will continue when everyone comes to work this morning.

APA is keeping quiet as it tries to unscramble the omelette.

The group is made up of Macquarie Bank, TPG, Allco Finance and Allco Equity Partners and Canada's Onex Partners. Smart, sophisticated players all. And now looking decidedly foolish. How could it all go so catastrophically wrong in this world of smart suits and high finance?

But it is Samuel Heyman and the other hedge fund managers who will be fighting most ferociously to regain any advantage they can out of their own disastrous mistakes. Heyman is clearly going to be marked as the man responsible for the disaster, particularly by his "friends" at Highbridge and Polygon. Presumably the paybacks will be vicious.

But right now they all have a vested interest in trying to help each other solve the problem as much as they can. "Some of the biggest hedge funds in the world own nearly half this company and they are looking at huge losses," says one of those involved. "You wouldn't want to be standing between them and a pile of money."

Unfortunately for Qantas, that is just where the airline is.

[Jabawocky]

Gooday OS

The modern corporate raiders have no idea about the "moral & ethical compass" and in fact threw them away when the new gen "moral & ethical GPS" was introduced.

Trouble is they are all so smart they can't read and comprehend the User Guide...........;)

I actually wonder how much better off we all would be with a simpler financial system without all the hedge funds and wheelers and dealers and short selling etc etc etc etc........ you get the idea:bored:

J:ok:

[Angle of Attack]

But look at the share price now.... Surely it was better for the shareholders

No not really the share price actually went above the offer price after the deal collapsed so quite frankly your comment collapses too! lol!:ugh:

[Blip]

But look at the share price now.... Surely it was better for the shareholders
to sell to APA

What, and pay tax on the capital gains AND lose the income stream that are the dividends paid to the share holders for years and years to come?

[Sunfish]

Craven:

Isn't hindsight a wonderful thing

Many of us, including me, sang long and loud about how this deal stank long before it's demise. Read old Pprune Threads.

[fire wall]

Gentlemen,
Allco Equity Partners (AEP) was the leader of the bidding consortium.
AEP is the private equity arm of Allco Finance Group (AFG).
AFG has been placed in the hands of the receivers.
AEP has severed ties with AFG and still lives - a cause for celebration?.... I think not.

[Quill Shaft]

o not really the share price actually went above the offer price after the deal collapsed so quite frankly your comment collapses too! lol!

AOA,

You are quite right, I was quoting comments both GD & MJ have said to justify their endorsement of the offer after the bid fell through... I was just being sarcastic ;)

[Going Boeing]

Lavish lifestyle of an Allco

Anthony Klan | November 08, 2008

GORDON Fell raised $870 million from investors, invested it in high-risk property trusts, then lost almost everything in the gamble.

Everything, that is, except more than $50 million which Mr Fell -- also chair of Opera Australia -- personally pocketed for the privilege, by way of management fees and selling parts of the business.

Although the Rubicon stable of companies has lost more investor funds than were lost in the Westpoint, Fincorp and Australian Capital Reserve collapses combined, the Rubicon founder and his wife live a life of luxury, owning a grandiose $29 million Sydney harbourfront mansion.

Rubicon and the three listed property trusts it manages -- Rubicon Europe, Rubicon America and Rubicon Japan -- have long raised analysts' eyebrows.

Those analysts and other market commentators had long warned the excessive debt in those vehicles, often poor purchasing decisions of properties parked in the trusts, and management fees charged, would ultimately see their values decline.

Yesterday Rubicon arm Rubicon Holdings was placed in administration after action by the National Australia Bank which is owed about $20 million by Rubicon Holdings.

Rubicon Holdings -- which provides the staff who manage Rubicon property trusts -- was bought by Allco Finance Group in October last year in a cash and scrip deal worth $276.6 million.

It was the sale of Rubicon Holdings to Allco that finally crippled the latter.

Allco HIT, one of the listed property trusts with financial links to the Allco, was also placed in administration yesterday.

With respect to debt levels in the Allco group being excessive, Mr Fell yesterday conceded those naysayers were correct.

"With the benefit of the retroscope yes (debt levels were too high)," Mr Fell said.

"I absolutely accept responsibility for what's occurred but I do think that the whole system was orientated in that direction."

However, that responsibility did not extend to handing back to investors -- whose combined $870 million outlays are now worth $15.5 million -- some of the $50 million-plus Mr Fell has earned at the helm of failed empire and by selling Rubicon Holdings.

"Would you do that?" Mr Fell responded incredulously when asked about handing back some of that money.

"No one's children were kidnapped and held up at gun point until they invested in the trusts."

Many investors in the three Rubicon trusts will be wondering how shares they bought in the trusts at issue prices at or above $1 were now worth between 0.5c and 2c each.

The Rubicon line was that it used investor funds to buy real assets such as office buildings and it would pay distributions, and hopefully deliver distributions and capital returns.

The vast majority of the debt in the funds was borrowed on the grounds it was to be repaid more than seven years into the future.

As such, the current credit crisis had had very little impact on those loans or the assets the cash was borrowed against, Mr Fell said.

But the problems arose -- and Mr Fell agrees -- after Rubicon Europe and Rubicon America in late 2006 bought hundreds of millions of dollars worth of packages of extremely high-risk mortgage loans -- loans to companies such as property developers that were later packaged up and onsold.

All the mortgage loans sold by the Rubicon Europe and Rubicon America trusts had been owned by parties associated with Rubicon.

Rubicon Capital was one of the major sellers of the mortgage loans.

Mr Fell owned 45 per cent of Rubicon Capital; 20 per cent was owned by Allco founder David Coe, 20 per cent by Allco itself and 15 per cent by Rubicon executive director Matthew Cooper.

Less than 12 months after the transactions, demand for mortgage loans began to evaporate amid the credit crunch and the fortunes of Rubicon's trusts began to fade.

"That's what happened, but it could equally have well gone north," Mr Fell said.

"This happened about two years ago when everyone was feeling pretty optimistic about what the future held. It wasn't a clandestine transaction."

In December last year, seven years after Mr Fell founded Rubicon Holdings, he sold the group to the now failed Allco Finance Group for $276.6 million in cash and shares.

Of that amount Mr Fell earned about $28 million in cash upfront.

However, with Allco in receivership, Mr Fell -- and other Rubicon Holdings shareholders such as Mr Coe -- are unlikely to recover much of the scrip component, most of which was based on future performance benchmarks.

The deal won shareholder approval -- a report by an independent accountancy firm had endorsed the deal -- but not without a substantial "no" vote of about 20 per cent.

The main objection to the deal was that it was a related party transaction, with Rubicon shareholders Mr Coe and Mr Fell also sitting on Allco's board.

Mr Coe declined to comment despite repeated calls from The Australian this week.

"He (Mr Coe) has just called me from London to tell me he doesn't have the time to speak with you," a spokeswoman said on Thursday.

Votes for the Rubicon Holdings sale were bolstered because Allco staff accounted for about 37 per cent of the vote.

At the time of the deal shares in Rubicon's three trusts were trading at between 75c and 90c.

Shares in all three trusts slumped in the weeks following the deal and are now worth between 0.5c and 2c per share.

Just two months before the sale went through Mr Fell spent $28.75 million on a five-bedroom, eight-bathroom, seven-garage Sydney harbour mansion.

When quizzed in February about his ability to keep the mansion following the meltdown in Allco's share price, Mr Fell said he did not own it.

"It's actually my wife's and it's not for sale," he said in February.

[Wingspar]

Lovely, absolutely lovely.

Isn't competence, or incompetence, worth something?

[teresa green]

As I said in a previous posting, its all in the wifes name. I find it very hard to have any charitable thoughts about these two, the only consulation is they did not get their sticky hands on QF, which would now be going thru a stripping of assets to keep them in their house. Pass the sick bag. :*

[StallBoy]

I have a tear in my eye, what would Australia be without the flying kangaroo. The worlds best airline with the best service and the best planes and the best pilots and and and......
If the 787's don't arrive on time which is very probable and are not a complete success then Qantas will go broke.Dixon and his mates could not run an airline in their dreams and just look at what Qantas has become. Who would fly on this airline??? very few of their flights are on time and if you fly internationally the last thing you need is to arrive hours late let alone days late:=. It really was a pity that the sale to Macquarie bank did not take place, at least the share holders would have made a few dollars out of the deal. We just had the farcial episode of Qantas's first A380 spending weeks flying around the country and overseas on "training flights" :ugh:while the real airlines of this world put their new 380's into service as soon as they arrived.
Old aircraft, very poor service, high fares and never on time, does anyone think Qantas will survive into the next decade?????:hmm:

[teresa green]

What a sad and depressing little post stallboy, the answer is yes, QF will survive, because the staff want it to. Just give them a chance to get it back on its feet, (and they will) provided the right boss is at the helm. Thirty Six thousand people have worked hard to keep it going under dreadful times, and thirty six thousand people (being the little aussie battlers they are) will roll up their sleeves and have a bloody good go. Have some faith. :=

[Spelling Police]

Really great try at a G-up StallBoy. You made it a little to obvious though as it is hard to believe anyone could be that ignorant.

By the way, it is farcical not farcial.


SP

[Pundit]

An Allco director, supporter of current QF Chair and CEO Designate





http://www.allco.com.au/dm_pictures/Rod_Eddington_347_oOIX22.jpg

[QFinsider]

Pundit dont forget that little t*rd is a business advisor to Rudd....
How much did Therese make from non competitive tenders of Govt business..?

The deck has always been stacked..Privatise the profits, socialise the losses...

[blow.n.gasket]

Bravo Teresa
Spot on!:ok: