Wesfarmers to raise $2.5 billion for Coles debt. As expected Wesfarmers has announced a fully underwritten rights issue to raise just over $2.5 billion as the centrepiece of refinancing the $4 billion in short term debt for its Coles takeover. The one for eight issue at $29 a share was revealed this morning as the company asked the ASX for the halt on trading its shares to be extended to next Monday (28 April) to allow the institutional sale to be completed. The company has already raised $700 million in a bond issue in the US at an interest rate of around 11%; it says it has $800 million in bank finance; and in addition to the $4 billion refinancing, it has secured a new three year working capital facility of $1 billion. The huge issue will mean that by the end of May over $8 billion in cash will drain from the market to pay for the WES issue and for the final payment on the T3 Telstra issue. — Glenn Dyer
Takeover bid expect for Macarthur Coal. Queensland coal miner, Macarthur Coal, which exports pulverised coal to the steel mills of Japan, South Korea and increasingly into China, may face a $3.4 billion takeover after founder and former chief executive Ken Talbot sold his 24% stake for around $13 a share. Talbot is facing corruption charges in Queensland over an alleged $300,000 loan to former government minister, Gordon Nuttall. Macarthur shares jumped as much as 17.4% to a record $15.55 this morning, before settling back to be up around 14% at 11am. If the buyer was a single group, they will have to reveal themselves as the buyer to avoid breaching disclosure laws. — Glenn Dyer
The beauty of being a hedge fund manager. While many rightfully point out the obscene salaries earned by executives, hedge fund managers take obscenity to a whole new level. Hedge fund manager, John Paulson, earned $3.7 billion last year. He can thank the idiotic investors who shove money into hedge funds seeking that elusive “alpha”. Paulson wisely bet that property prices would fall. Of course, hedge funds can lose money pretty easily as well. The beauty of being a hedge fund manager is that you profit from the rises, but don’t lose on the falls (in fact, hedge fund managers usually receive 2 percent base fees regardless of fund performance). Forbes reported earlier this month that that one hedge fund manager claimed “this year is going to be really ugly … one day you are off 2 percent and, before you blink, you are down 20 percent. This year is just unpredictable and crazy.” Forbes noted that the manager did not want to be identified because his investors do not know yet about his double-digit losses. –– Adam Schwab
Austock boss shouldn’t throw stones. The Smage’s Marc Moncrief and Vanessa Burrow produced a front page spread on Saturday, questioning who investors can trust, following the Opes Prime, Tricom and Lift debacles. The authors noted Austock boss, Tim Boyle, who claimed that the margin lending fiasco has “made us look like a joke in international financial markets … where we had a reputation of being quite a straightforward and well-regulated market, the polish has come off quite a bit.” It is ironic for Boyle to make such comments given Austock’s recent performance. The small investment bank floated last year at $1.80, hit $2.20 but has since plummeted to only 95 cents. Austock’s largest client, ABC Learning Centres, has scurried from its “company transforming” US investment while Austock’s managed funds (whose investments include ABC leased properties) has been dumped from $1.88 to only 94 cents. Another Austock managed fund, API Fund (whose investments include AEU), is trading at only 85 cents – down from $2.10 a year ago. –– Adam Schwab
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Chris Murphy wants his fruit back. While the learned Justice Ray Finkelstein prepares to hear the case involving Opes Prime, ANZ and who exactly had beneficial ownership of the shares, it is interesting to note the views of Opes’ largest client, Sydney lawyer, Chris Murphy. Murphy told Crikey last week that he believed the complex Securities Lending and Borrowing Agreement conferred only the legal, rather than the beneficial title to Opes Prime or ANZ. Murphy’s opinion was based upon the fact that Opes clients could instruct ANZ Nominees how to vote their stock at AGMs and accounted for dividends – all indicia of beneficial ownership remaining with the client. To use a legal analogy, it was widely believed that Opes owned the “tree” (being the legal interest), while the client retained the “fruit” (the beneficial interest). So it appears ANZ will be arguing before the Federal Court that Opes clients were well aware of their rights with regards to their shares (and were never the victim of any misrepresentation of course by the bank or Opes), all the while, one of Australia’s leading solicitors and largest private share traders believed he retained beneficial ownership of the shares. –– Adam Schwab