Recent legal action by two hedge funds aimed at forcing AMP to buy back the notes at the $100 face value on account of the recent AMP demerger achieved $98, a great result for all AMP noteholders and AMP itself. Friar Tuck comments.
AMP’s Andrew Mohl, in a recent interview with the Australian Financial Review, called it “greenmail” and the court case as an “irritation”.
Mohl intoned “the improved performance in underlying results and acceleration in our ability to repay debt are both very good news for our shareholders. The more important pointers to our future are the improved performance in the demerged AMP and the acceleration in our ability to repay debt.”
Great news indeed from an institution that yesterday had all but blown itself up completely.
www.dictionary.comdefines greenmail as “an anti-takeover maneuver in which the target firm purchases the raiders stock at the price above that available to other stockholders”.
How uncharitable and unfair can one be?
Mohl and his board were faced with the real possibility that the court would find that the demerger was a default event, with perhaps terminal consequences for AMP’s credit rating and market credibility, as at least one credit analyst noted after AMP’s announcement.
Apart from that, all note holders would have received the same price, $100. Now they will all receive a handsome $98, if they want it, and AMP shareholders have been spared a credit and market debacle at their company. Krug all round please for the latter day Robin Hoods.
Why didn’t Mohl simply describe Robin Hedge and company as opportunistic but legitimate shareholder activists, who had taken a position to enforce all noteholders’ rights the way they saw it? Alternatively, could AMP have simply asked the court to make a declaration on note holders’ rights, particularly as there were reports that AMP had lined up a $1.2 billion credit line with UBS to pay out note holders and there was no question about AMP’s ability to pay? Wonder what happened to that?
Shouldn’t the local analysts and market have looked more closely at what would happen to AMP stock if AMP was found by the court to be incorrect? The issue wasn’t rocket science. They could easily have formed their own view. If they did, they were awfully quiet about it.
Why should buyers of financial products generally not put themselves in the shoes of the AMP note holders and ask themselves what hope they would have if they weren’t a multi-kakajillion hedge fund asserting their rights?
And why bother putting in rights provisions in legal documents if the first port of call is routinely no port at all unless forced at the point of a legal sword?
Robin Hedge and his merry men have amply demonstrated that if an Australian institution exposes its gonads over the parapet, it will cop a heavyweight activist arrow if things stack up. And that may not be a bad thing if this AMP example is any guide to the future.
Good luck and good hunting