typing is not activism….

environ mentalism, fresh articles, interviews & checkitouts from Sydney.

Financing for the pulp mill

with 4 comments

Just a quick instalment, mainly because the picture of Robin Gray waving goodbye to Tasmania’s future and hello to a fat Christless bonus done fired up mah blood.

“heh heh heh heh heeeeeeeeh. You are all my bitches now….”

Statements of the obvious aside, the skew-eyed extra from Home & Away has declared that financing the mill without ANZ shan’t be a problem. Obviously Gunns will have a somewhat better time of it should ANZ come to the party, so there’s every reason to maintain the rage on that front. Similarly, Poyry Forest Industries and indeed any and all divisions of Poyry are to be watched in any manner possible by anybody able to. With their long term relationships as Gunns’ main consultant and an advisor to the federal forests ministry they are a mover and shaker with plenty of motivation and access to make major scale funding happen from abroad.

But perhaps most telling is the development pointed out by Mike Bolan. Gray’s son, Ben Gray, is indeed tapped into major private equity group Texas Pacific. They hold several billion dollars and are more than capable of leveraging more. They have already partnered in the failed bid for QANTAS, and taken a sniff of Coles. There is extended footage here of Ben Gray talking with Janet Alberici – he looks disconcertingly like a bidgenned Kevin Rudd.

Also of interest is the name Newbridge, as this group was founded by Texas Pacific and has one of its global offices in Melbourne.

With approximately $3 billion in capital under management, Newbridge pursues
acquisitions of significant stakes and control investments – often together with local partners – and seeks to play a significant role in the development and implementation of strategies aimed at maximizing shareholder value.

Well, if you don’t quite crack it with an under-valued airline, a big fat high interest loan to a company often associated with claims of legislative domination and a relo on the board might seem like a pretty sweet deal – especially when there’s the option to seize masses of land and forest plantations all over Tasmania – if not Australia – should they welch on the deal.

Mike, I know you’re out there – I’d love to host any more detailed theories you have on where they’re hiding their cash-filled piggies.


Written by typingisnotactivism

October 7, 2007 at 6:31 pm

4 Responses

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  1. Wouldn’t it be a conflict of interest for Ben Gray to do this and earn commission from a deal done between his father’s company and the Tasmanian government?

    t.i.n.a.: he could always recuse himself from involvement in any such deal, instead leaving it to be handled by a work colleague who would come to the arrangement with no set intentions and assess it purely on its merits by diligent consideration of such long term risks as impacts of climate change and the inevitable cost of taxing carbon. . . . . . . . . . . BWAH HA HA HAHaaaa BWA HA BWA Ha bwa hahahahah aha.

    Sorry Mike – sure you understand why I came unstuck there. I have this really horrible feeling that conflict of interest no longer technically exists in Australian business or politics. Basically, as long as you’re not drinking in the same restaurant as Brian Burke you’re apples. Is that unfairly harsh or too grim?

    Mike Bolan

    October 7, 2007 at 9:13 pm

  2. David Obendorf
    Oct 8th, 2007 at 10:32 am
    Gunns Ltd want to build & run a ‘world class’ pulp mill! Blah.

    The timber giant has been charged under Workplace Safety laws after a ship-loading boom at their Triabunna woodchip depot came crashing down across the Dyna Ware as the boom was being positioned to begin loading chips into its holds. The incident happened last August.

    So this company now faces the charge of ‘failing to provide plant in a safe condition’ and ‘failing to ensure employees are safe from injury and risks to health’.

    Apparently, Workplace Standards investigations into the mishap found that the length of the cable supporting the boom was too short and therefore ‘insufficient to support the boom’. An engineerining oversight of some significance you would think, but then again if the company has been sending $50 million on its pulp mill proposal and several millions in its Gunns-20 legal, maybe they needed save a few dollars.

    How about a retake on the old adage: “Penny wise, Pound foolish” Try: No cents [sic], just foolish.

    David Obendorf

    October 8, 2007 at 10:34 am

  3. Is there someone who profiles the environmental credentials of different financial institutions? Have been asking people to threaten to boycott ANZ if it funds the mill but where can they go & be sure it’s not also evil? I think the only Aussie bank ‘Bank Track’ profiles is ANZ…?

    hmmm. There’s a magazine called Australian Ethical Investor put out by a Brisbane-based group of similar name. I would imagine that they migh know a good answer to that question. Will try to follow it up this week. & Thanks for another Capital Idea!!

    capital ideas

    October 8, 2007 at 8:38 pm

  4. Post-August I still don’t see Ben Gray writing a cheque for $1.7 bn. He could write the cheque for $150 million high interest Mezzanine, perhaps even another $300 million of equity-linked notes or other hybrid, but they will still need a syndicate for the $1.25 billion of senior debt, probably of 5 or 6 banks going to underwrite $250 million each.

    An alternative to the senior debt syndicate would be a junk bond issue, but I still think that would be tricky post-August, and the last big Aussie construction deal that used project bonds was Anaconda Nickel, where the bond holders were severely burnt on construction cost overruns.

    Given Peacock’s comments I find it hard to see the lenders legal advisers providing a clean opinion on the project approvals until those studies are done. A punter could start construction, such as site works before then, without spending the big dollars until the effluent studies and the senior debt is confirmed, but independent board members would recognise the horrendous risk associated with such a course.

    The more expensive the debt the harder it is to make the deal stack up, so simply borrowing all mezzanine finance won’t do (and their business plan usually piggy backs off the senior bankers due diligence).

    I think there would be no chance of Ben Gray managing the deal if TPG was a bank, but given that it’s not, anything is possible. That said TPG’s senior managers in the US are probably more keen on burnishing their green credentials rather than pyrolising them so i would be very surprised if they stepped beyond $50 million to $150 million as a participation.

    Private Equity and hedge funds work with other people’s money, banks would still have to stand behind TPG to enable them to do this, and the same due diligence is likely to apply.

    Alex Wadsley

    October 9, 2007 at 3:48 pm

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