ozl fortunes could change, page-33

have a read of this, CBA looks like its causing all the problems.

Matthew Stevens | December 13, 2008
Article from: The Australian
SOME describe Ross Griffiths as an elite banker, uncompromising, experienced and enormously strong-willed. Others, more bitterly, say he is the most obstinate, difficult man in the Australian commercial banking system.

What is certain, though, is that Griffiths is a bloke who could, almost single-handed, dramatically amplify the recession we are about to have.

So just who is Ross Griffiths?

He is the credit and risk management for Commonwealth Bank of Australia. Which means, given our suddenly straitened economic times, he is the bank's corporate hitman. Cometh the hour, cometh the man. When CBA boss Ralph Norris finds hundred-million-dollar problems, he sends in the burly Griffiths.

Over recent months, Griffiths and the Commonwealth have played a singular, shaping role in some of the most turbulent workout negotiations in recent memory. A 15-year veteran of Which Bank, Griffiths has won grudging respect for some for his aggression in protecting his bank's interests. But he has also built a cohort of powerful enemies too.

It was Griffiths who drove Bob Mansfield and Sir Rod Eddington to turn out the lights at Allco Finance Group in November. Griffiths was the "hardest arse" in assembling the fraught and still impermanent life support offered to Babcock & Brown. It is Griffiths who is blamed for triggering OZ Minerals' continuing dance with debt death. And, most critically, it is the foreboding figure of Griffiths who stands between Centro Properties and survival.

Over the first 12 months of what is likely to be a long, painful period in the banking sector, the CBA has stood out among the Four Pillars. There is a view that the nitpicking aggression of Griffiths' team has become a serious issue in these uniquely unsettled times. "They are stuck in the dangerous cut-and-run era when we pulled the plug hard and early," a competitor said this week.

"Call me naive," says one high-profile subject of Griffiths' recent attention, "but I wanted to imagine he just didn't understand what his team were doing to us. But I was wrong. This was quite deliberate.

"He constantly works to gain leverage at the cost of his competitors and, in doing so, he puts them in a position where, even if they want to keep someone going, they can't.

"Some of our team thought he was being irrational. He was not. But he is being massively short-sighted."

But Centro Properties is no place for the short-sighted. Its collapse would be an economy-shaking event. For 10 months now, the ludicrously constructed, trans-Pacific shopping mall owner has effectively been in the hands of two syndicates of banks and 10 insurance companies which are owed over $6 billion. The CBA is owed $1.2 billion by Centro. Of that, $1 billion is secured -- making the bank Centro's biggest secured creditor.


Of the other pillars, the NAB has the next biggest secured exposures at $750 million with a further $200 million unsecured, while the ANZ has $700 million of secured debt and $680 million unsecured and Westpac $558 million secured, most of that courtesy St George Bank.

Centro needs to get 23 separate financial institutions to sign off on that plan. As of last night, it had the endorsement of 22. The hold-out? It is Griffiths and the Commonwealth.

When Centro's Glenn Rufrano held a summit of his syndicates in New York to deliver what he calls a "stabilisation proposal", one bank was missing. The CBA.

For several months now Rufrano has argued that it is time for Centro to stop working for its banks. He wants them to swap a portion of their debt for hybrid equity. His US lenders are with him. As are seven of the eight lenders to the Australian syndicate. The local hold-out? The Commonwealth.

Centro has until close of business on Monday to secure agreement on Rufrano's plan. Without a deal, Rufrano, the canny crisis manager called in last February to refloat Centro, will walk. And Centro will likely fold.

If that happens, the banks will take control of some 777 shopping malls -- 122 in Australia and 651 dotted through the US. To recoup their capital, the banks would seem to need to sell those assets. What makes Griffiths and the Commonwealth reckon they can run a liquidation process better than Rufrano is anyone's guess. But the systemic risk of that approach is fearsome.

Selling assets is exactly what Rufrano has been trying to do, with blessed little success, for the best part of 2008. The expectation is that the banks will need to chase deals at discount prices and that, in turn, could well be a trigger for armageddon in the $100 billion listed and unlisted property trust sector and the broader Australian commercial property market.

Even at the best of times, there is not a deep market for assets like shopping malls. But they are extremely valuable because they provide such a steady, strong flow of income to the likes of the property trusts.

A rash of cut-price property sales would force banks to revalue their commercial property portfolios just as surely as it would force both listed and unlisted commercial property trusts to mark-to-market their portfolios and then attempt to absorb the losses implied by that process on already hard-pressed balance sheets.

The reason Centro has survived until now is that the banks have steadfastly refused the administration-liquidation option. This, in part, reflects the scars of the 1990s property crisis which so severely damaged the balance sheets and reputations of Westpac and ANZ in particular.

"You have to be mindful of external conditions," one banker commented yesterday. "Sure you have to protect your interests, but banking is a long game. You cannot just flip the economy 180 degrees in a couple of months. That is what we learned in the 1990s. If you put companies through too early in the cycle you suck what life there is left out of the economy. You stuff the economy in the short term and your own business reputation over the long term."

Centro, mind, is not the only pressing, headline-generating deadline before Griffiths and his team. OZ Minerals has until December 29 to deliver, with black and white certainty, the refinancing of two facilities worth $US560 million ($856 million).

The urgency in refinancing these facilities is largely a product of the Commonwealth's intervention. OZ believed that the "reasonable endeavour" clauses in those two loan agreements would allow it to routinely roll its repayment dates.

That changed late on Thursday, November 27, when the Commonwealth informed OZ Minerals that it would not roll. OZ immediately sought a trading halt and then, two days later, the suspension in which it remains.

According to insiders, Griffiths' people would only extend the repayment schedule if the bank received additional security. The request was considered and rejected at a board meeting.

In delivering greater security to one bank, the company ran the risk of triggering default conditions with all its other bankers. This risk was clearly understood by the Commonwealth.

What puzzled everyone, including the other bankers, is why the Commonwealth would seek more security knowing it could not have it.

OZ Minerals was declared a dead company walking last Wednesday after it announced it was not likely to meet the refinancing deadline set only a week earlier.

But where there is life there is hope. According to one player in this near-tragic OZ Minerals saga, this has been a "cathartic week" for its refusenik banker, a week that began in traumatic division and ended with "a wonderful consensus beginning to emerge" between the miner and the banks.

Sources suggest that over the past two weeks the Commonwealth has been outed as a core problem in the OZ negotiations, become the subject of high-level political lobbying, particularly from a South Australian Government concerned that financial institutions that benefited from federal government guarantees were needlessly threatening jobs and, it is claimed, been threatened with legal action by an increasingly agitated and desperate OZ Minerals executive.