Wow - a mega disaster in the making, page-76

From afr today:

Not too late for a ticket to Downer's biggest game in town

by Sarah Thompson  Anthony Macdonald  Joyce Moullakis

If week one in the Downer/Spotless takeover saga was about chasing the deal, week two is about chasing the ambulance.

Investment banks are queuing up to get in front of Downer's board and individual non-executive directors, seeking a seat at the table as the contractor tries to dig its way out of a $2 billion-plus conundrum.

The would-be advisers' pitch is pretty straightforward. Downer's existing bank, UBS, is conflicted because it has to manage its own risk around the $1 billion rights issue. UBS was sole underwriter to both the institutional and retail offers. The institutional offer came up $268 million short, while the retail shortfall could be a similar size with the stock trading 7 per cent below the entitlement offer price.

The pitch is pretty easy to understand, albeit it is based on the premise that UBS was left holding stock from the institutional shortfall and was not able to/did not choose to underwrite the retail offer in full.Few people know whether either of those is actually the case, although the indications from more than a dozen funds that Street Talk has spoken to are not good on either front.

And the lack of formal messaging out of Downer or its bookrunner through the institutional offer only fanned the flames.

It'll be interesting to see if Downer does go for another adviser. There is no doubt things have not gone as smoothly as they would have liked, and there are plenty of people knocking on the door with an offer to help.

Bulge brackets and "independent" firms are both known to be spruiking their wares.

Also chasing the ambulance this week will be hedge funds who are able to short the stock for the first time since the deal was announced. [As part of the rights issue, Downer's institutional investors clawed back their stock from the borrow pool so they could act in the entitlement offer. The shares are expected to switch back to nominees and into the borrow pool in coming days.]

And they may not be the only sellers. Sub-underwriters are expected to consider shorting the stock to manage their own risk, while it would not be uncommon for those institutional investors who did not take up discounted shares in the entitlement offer to also consider heading for the exit.


Read more: http://www.copyright link/street-ta...st-game-in-town-20170326-gv6l3m#ixzz4cT5s3Tz0