rhg & john kinghorn

Dear ALL,

Kinghorn drops a clanger
MICHAEL EVANS
April 23, 2011
For a man who has made a deft art - and many hundreds of millions - out of perfectly timed investments, John Kinghorn has made a meal out of his attempt to take control of RHG, the leftovers of the failed RAMS Home Loans group.
Make no bones about it; Kinghorn is doing his level best to get the profitable off cuts on the cheap. And by quietly offering a low-ball buyout thinly disguised as a share buyback, he has been sharply brought to account by minority shareholders and corporate governance groups.
Already a lightning rod in the business community, it's an embarrassing and potentially costly setback for Kinghorn.
Advertisement: Story continues below
A founder of the financial engineering house Allco Finance Group, he bailed long before Allco became a debt-laden mess that would collapse under billions. But he made his real fortune at RAMS Home Loans, which grew spectacularly in the boom years, as cheap financing fuelled a property boom.
The sale of RAMS that delivered Kinghorn $650 million just weeks before the financial crisis hit put him in the crosshairs for investors who were wiped out in the float.
Now it's the apparent disdain with which he is treating minority shareholders of the leftover business RHG which has drawn ire. As one RHG investor says, Kinghorn screwed investors on the way into RAMS and now he's screwing them on the way out. Nothing unlawful about that. Let's just call it doing business.
Kinghorn didn't make it to No. 100 on the BRW Rich 200 with a personal fortune of nearly $400 million by treating his business interests as a charity. In fact, RHG has among the highest interest rates and fees in the mortgage market.
In the post-financial crisis debate about the morals of Goldman Sachs and the ethics of Wall Street, Kinghorn's modus operandi leaves a bad taste in the mouth.
What irks shareholders is that as long ago as his chairman's address in 2007, after RAMS staved off collapse by selling the ongoing business to Westpac, Kinghorn promised to unwind the remaining business, RHG, and return money to shareholders.
''After meeting all liabilities and subject to its ability to refinance some or all of its warehouses and [financing] programs, the directors intend to return all net income and surplus cash to shareholders over time,'' Kinghorn said.
Four years later that process has finally begun and shareholders think it stinks. Kinghorn offered to return $240 million in cash at 88? per share, well below the company's own $1.16 per share valuation of its assets. Some shareholders value RHG as high as $2 per share.
But the company has two other valuable assets: franking credits and a $4 billion mortgage book.
Importantly, a paid consultant's report sent to shareholders showed scant regard to the fact that Kinghorn planned to delist the company and the value of the franking credits in the business.
They are vital pieces of information. By not taking part in the buyback, Kinghorn, who along with his son, Geoffrey, control 24 per cent of RHG, would increase their stake to about 80 per cent before de-listing the company and stopping paying dividends. Minorities took that as a take it or leave it offer. The Kinghorns would keep the valuable franking credits and mortgage book.
Some valuations put a sale of the mortgage book as high as $70 million. Former Babcock & Brown boss Phil Green has sniffed around the mortgage book. The franking credits will be worth another 80? per share by RHG's next results, shareholders claim.
Kinghorn has argued there is a risk to the viability of RHG. But his actions speak louder than words.
For their part, dissident shareholders have overreached, trying to gain control of the board with only 10 per cent of the company. But it's only the first round.
With Kinghorn forced to concede ground this week, stopping only at relinquishing control of the board, and now facing his buyback being voted down next week, the dissidents will be buoyed.
They have called a shareholder meeting for June to remove Kinghorn allies Greg Jones and John McGuigan from the board.
That gives Kinghorn time to come up with a new plan. He will need it.

Michael West is on leave.

Read more: http://www.smh.com.au/business/kinghorn-drops-a-clanger-20110422-1drav.html#ixzz1LNTGXekr



jukieoz836