After suffering significant negative publicity and fighting aggressively in the NSW Supreme Court, Macquarie Bank meekly walked away from its lucrative $47 million Allstate Exploration windfall on Friday, whilst creating an enormous incentive for the miners to get the operation re-opened.

The Mercury has the details of Macquarie’s offer to gift the potential $47 million windfall to miners, although some observers believe it’s a cynical PR step and others are pointing out it is likely to be worthless. As Crikey pointed out last Wednesday:

If the mine never reopens, Macquarie Bank and Allstate administrator Michael Ryan will have some extremely sensitive decisions to make about compensation, creditors, worker entitlements, redundancy pay and what happens to those cash reserves, given that the Millionaires Factory is at the front of the queue and is already well in profit, especially when you consider the hedge book.

By gifting the inter-company loan entitlement to the workers, Macquarie is giving them a large incentive to get the mine operating again. Macquarie would certainly benefit from this through its lucrative operation of the mine’s hedge book.

However, there are still serious questions over who funds the workers and creditors if the mine never re-opens. Macquarie has promised to let the worker entitlements be paid ahead of it, but what about current creditors and creditors from 2001 when the company first went into administration? They have only received 83c in the dollar and include the parents of one of the trapped miners.

Allstate shareholders were told last November that Macquarie had pocketed $3.3 million of the $54 million inter-company loan, but Friday’s announcement suggested there was only $47 million to go, so it looks like another $4 million has been handed over so far this year.

If Allstate doesn’t have enough cash reserves to fully satisfy all its creditors, the bank will come under pressure to write out a cheque over and above the $100,000 donation they have made to the Australian Workers Union’s Beaconsfield Miners Family Support Fund.

However, Friday’s offer is a positive step for all concerned and a sign that the hard men at Macquarie are sensitive to bad publicity and brand damage.