new twist - article on the age website...

Mark Hawthorne
January 30, 2009 Page 1 of 2 Single page view

EMBATTLED Brisbane Airport toll-road builder BrisConnections is facing hundreds of millions of dollars of defaults from its disastrous initial public offering, and a potential court battle with its underwriters, Macquarie Capital Advisers and Deutsche Bank.

When BrisConnections floated in July last year it issued 390 million shares at $3 each — an initial payment of $1, and two later payments of $1 for each share.

BrisConnections shares are now almost worthless, trading at just 0.1¢ each. If bought, the new owner picks up the bill for the two further $1 instalments, which is precisely what many small shareholders have done. When the next instalment of $1 is due on April 29, there could be more than $100 million of defaults from shareholders.

The biggest shareholder in the company, Australia Style Investments, is owned by Melbourne man Nick Bolton, 26, who runs an IT company from a block of flats in St Kilda.

Bolton will receive a bill for $47.6 million on April 29 and, like other shareholders, is expected to default.

Last October Melbourne housewife Fang He turned a $32,300 investment into a $65 million nightmare after snapping up 32.3 million shares of BrisConnections, or 8.26 per cent of the company, at 0.1¢ each. Fang eventually offloaded the shares.

Bolton bought 47,643,166 BrisConnections shares, apparently using a Commonwealth Securities margin lending account. With 12.2 per cent, he owns a bigger stake in the toll road company than the government-backed Queensland Investment Corporation.

If Bolton can't stump up the cash on April 29, underwriters Macquarie Capital Advisers and Deutsche Bank will have to pay as they must cover the amount of defaults.

Under the terms of the underwriting agreement, BrisConnections must perform "best endeavours" to contact its shareholders and inform them of their obligation to pay the two further instalments.

It is that definition that could be challenged in court, as both Macquarie and Deutsche try to avoid having to cover hundreds of millions of dollars of potential defaults.

A source with one of the underwriters said a legal challenge was being considered — based on the claim that BrisConnections had not performed "best endeavours" in notifying shareholders about the two $1 payments owed on each share.

A source with BrisConnections was aware of the potential for litigation with the underwriters, but said the company had performed best endeavours to notify all shareholders of obligations.

BrisConnections has tried to contact Bolton ever since he bought his shares in November.

"We have called him, we have written to him, we have knocked on his door," the source said. "He simply will not respond. We have no idea if he is in a position to make the next payment, but our position is that the underwriters will be responsible for any and all defaults, as covered by the terms of the agreement."

The threat of litigation follows news that two Labor figures shared a "success fee" for consulting work that helped a consortium win the Brisbane Airport Link contract.

Former politicians Terry Mackenroth and Con Sciacca pocketed a payment believed to be about $500,000 after the BrisConnections consortium won the tunnel tender.