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.
Down in the mouth: BrisConnections shares are almost worthless.Credit: Joe Armao
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.
Survival tactics
BEATING the heat may top most agendas on Collins Street at the moment, but in the financial world surviving the biggest financial meltdown since the Great Depression is proving more difficult.
There have been some remarkable snippets hitting the news over the summer as gen Y prepares for life on the dole for the first time.
Just take a look at some of the numbers BHP has slashed 3400 Australian jobs, David Jones has cut 150 from head office, Ford Credit has axed 160 jobs, mostly in Melbourne, ANZ has cut 800 banking and support staff jobs, and just yesterday PricewaterhouseCoopers announced 170 job losses nationally.
Such is the tension at work that classes at Meditation Melbourne are brimming with merchant bankers trying to find calm amid the global storm.
But, of course, no one can do self-help like the Americans.
In New York, you can now find a support group called Dating a Banker Anonymous, founded in November to help the partners of those singed by the global financial crisis deal with cancelled credit cards and shrinking bonuses.
Apparently you can join if you have an FBF which stands for "financial-guy boyfriend" and "your monthly Bergdorf's allowance has been halved and bottle service has all but disappeared from your life".
The main job, it seems, is to boost the egos of their alpha-male partners in these parsimonious times.
But there are going to be plenty of potential members of Dating a Banker Anonymous. According to a report from New York's Independent Budget Office, about 33,300 finance jobs on Wall Street, or 7.1 per cent of the 2007 peak total, will be lost by June this year due to the meltdown.
Of course, some land on their feet.
Michael Alix, who was Bear Stearns' chief risk officer from 2006 until 2008, when the bank imploded, has joined the US Federal Reserve as a senior vice-president in the Bank Supervision Group.
Apparently his job is to "oversee the financial safety and soundness of banks, which are inspected by Federal Reserve examiners".
Which is akin to a computer hacker getting an IT job with the FBI.
Then there's Jessica Walter, the Harvard-educated former vice-president of credit strategy at Bear Stearns, who is now in the cupcake business.
Walter has started a company called Cupcake Kids in New York to provide birthday parties and cooking classes for children.
There are plenty of similar stories coming out of Wall Street. Jeff Salmon, who traded asset-backed securities at Bank of New York Mellon, now owns a New Jersey barber shop selling $US12 haircuts.