Aussie Bob Mansfield might be the public face of Airline Partners Australia but claims a privatised Qantas will be majority Australian owned and controlled are looking more doubtful with each passing day.

For starters, when dealing with more than $15 billion in debt and just $3.5 billion in equity, to understand control you need to examine the power of the lending syndicate.

The Airline Partners Australia bidders statement does not disclose the composition of the banking syndicate but The AFR’s Chanticleer columnist John Durie yesterday revealed it comprised Morgan Stanley, Calyon, Citigroup, Deutsche Bank, Goldman Sachs and Royal Bank of Scotland.

Surely the lack of any major Australian bank in the lending syndicate should be taken into consideration, especially when the Federal Government will effectively be a lender of last resort should things turn sour.

If a privatised Qantas breaches its lending covenants the future of the airline will be determined by foreign bankers in places like New York and London.

Even the claims that Qantas will have a majority of Australian equity are hard to sustain. The publicly disclosed figures on page 35 of the bidders statement claim that Qantas is currently 46% foreign owned but this will fall to 38% in terms of voting shares and be right at the cap of 49% in terms of economic interest.

The use of voting and non-voting shares is a ruse in itself that is rife in the US but was only really exploited by Rupert Murdoch’s News Corp in the Australian market. However, the figures ignore the fact that Macquarie Bank, a 14.7% contributor to the equity package, is currently 30% foreign owned.

In fact, this Qantas deal will effectively prevent foreign bids for Macquarie, Allco Finance or Allco Equity Partners, which together will control 61.2% of the Qantas votes. Do shareholders in these three stocks really want such a poison pill and how will the Federal Government police the foreign component of the Aussie equity?

We all know Macquarie bases many of its vehicles, including Sydney Airport, out of Bermuda and it would be interesting to know the ultimate ownership structures behind the Allco Finance shareholdings controlled by David Coe and Nicholas Bain who together control more than 30% of the company.

Given that Allco is the master of tax effective structuring, it would not a surprise if a foreign tax haven or two was involved in their own personal shareholdings.

Peter Fray

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