[hchtml]Macquarie bails its clients out of BrisConSaturday, 18...

Macquarie bails its clients out of BrisCon

Saturday, 18 April 2009 -- The Australian Financial Review -- Jacqueline Maley

[quoted in full -- in public interest; check against original]


Macquarie Group is quietly buying out the BrisConnections stock held by its private clients to relieve them of the liabilities due on securities the investment bank once promoted but which it now privately acknowledges to be toxic.

The Weekend AFR understands that, when the BrisConnections register closes next Wednesday ahead of the $1-per-unit call on the now worthless stock, Macquarie will have taken out its private wealth management clients via a series of private transfers.

BrisConnections units are listed at .01c, the lowest price possible on the Australian Stock Exchange. They have not traded on market since Macquarie bought 31.4 million units on market on March 31 - an 8 per cent share that would have blocked the wind-up vote proposed by BrisConnections' renegade major investor, Nicholas Bolton.

In the end the vote, held on Tuesday, was in no danger of passing because Mr Bolton sold his proxy votes for $4.5 million.

Macquarie's latest acquisition will add another 2 to 2.5 per cent to its existing share of BrisConnections, taking its holding to about 10 per cent and lifting its exposure by tens of millions.

The buy-up amounts to a tacit admission that the $4.9 billion BrisConnections project, which Macquarie put together, sponsored and underwrote, has been an abject failure.

It is believed Macquarie chief Nicholas Moore is under great pressure to resolve the fiasco and has become personally involved in moves to rescue distressed retail investors unlikely to meet the calls on their units.

Some sources claim Macquarie brokers were pressured into pushing BrisConnections scrip on to its private clients. The bank, being an underwriter to the project, reportedly was keen to avoid a shortfall in the original float. Last year a Macquarie spokesman said several funds managed by Macquarie independently decided to take positions in the July 2008 float.

Macquarie faces mounting exposure on the troubled project. In a related development, it is believed the Australian Securities and Investments Commission (ASIC) will scrutinise the legality of the deal struck between BrisConnections' builders Leighton Holdings and Mr Bolton ahead of Tuesday's shareholder meeting. Mr Bolton owned his stock through Australian Style Investments, but Leighton paid the $4.5 million into another of his companies, Australian Style Holdings.

It is possible Mr Bolton breached his director's duties in making this arrangement. This in turn raises concerns that Leighton may have been complicit in a breach of the Corporations Law. Meanwhile ASIC warned investors it was illegal to transfer shares to fictitious persons, a ploy it is believed some BrisConnections investors might have been considering to avoid paying next week's call.