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Today's quote:

Sunday, July 12, 2009

Too cool for school and running around buying things with no cash to pay for them.

Listed infrastructure funds were Australia's biggest contribution to the Wild West of the global financial crisis. Investment bankers made billions in fees, slicing and dicing infrastructure assets all over the world. Eventually, fed-up investors, sick of the fees, conflicts, poison pills, stacked boards, tax havens and excessive gearing, and having lost billions through the likes of Babcock & Brown and Allco and many others, had had enough.

And so they also gave the thumbs-down to BrisConnections, the
developers of Brisbane's $4.8 billion Airport Link tunnel, which had been floated in 2008 at $3 each, with $1 payable upfront and two further $1 payments due nine months and 18 months after the allotment date. When the shares 'tanked' and at one stage sold for as low as one-tenth of one cent, bottom-feeding retail investors bought up hundreds of thousands and millions of units in the hope of a quick buck. Many of them now face bankruptcy, with the first $1-instalment having been due in April, and claim they did not know BrisConnections was a 'stapled share', obligating them to make additional payments. The total liability owed by these unitholders is $780 million.

Nicholas BoltonWith punters fearing bankruptcy from the outstanding payments, in comes the "white knight" Nicholas Bolton, a 27-year-old university drop-out who once worked on the special effects for Scooby-Doo. He offered to take the units off the distressed holders - for a $1305 administration fee! In this manner, he became BrisConnections’ largest unitholder through his company 'Australian Style Investments' (ASI), albeit with a whooping $154 million liability attached - although that seems of little concern to him as 'Australian Style Investments' appears to be one of those proverbial $2-companies (or, thanks to inflation, a $100-company) and is of no substance. He then got the remaining unitholders on side to amass the required 75% voting-block with which to call for a meeting to have BrisConnections' board changed and the company wound up so that all unitholders' liabilities would be extinguished.

However, it would appear that Bolton’s real aim was little more than that of a green-mailer (the term “greenmail” became ubiquitous in the go-go 1980s, where corporate raiders like Sir James Goldsmith or T Boone Pickens would acquire a stake in a takeover target and demand a premium from the company for their minority shareholding) as, unbeknown to the other unitholders, on the 8th of April he switched sides and cut a secret deal to sell his proxies (voting rights), although not his units, for $4.5 million to the main construction contractors who then used them to defeat the winding-up motion of the other retail unitholders in order to keep their profitable construction project alive.

There's more, much more, to this story but these are the nuts and bolts. In the eyes of those he turned on, it's the story of Australia's foremost prat! Scooby Doo indeed! Meanwhile, as the ASX investigates, Bolton has apparently disposed of his BrisCon units and set his sights on yet another fund, the Multiplex Prime Property Fund.