The subprime mortgage credit crunch continues to take victims in the Australian markets, despite claims that our closeness to booming Asia would spare us the worst.
Deals worth well over $11 billion look like they have been abandoned because of uncertainty, while two floats were pulled late Friday while one of the country's leading blue chip fund managers showed unusual sensitivity in excluding media yesterday from a briefing that would have discussed surprise losses related to the subprime mess.
Rams Home Loans Group has already been badly wounded by the subprime mess, while hedge funds like Basis and Absolute Capital have seen funds fail as a result. Macquarie Fortress, part of the Macquarie Bank extended family, has also been hurt financially
We may still be spared the sort of pain investors in the US and Britain are experiencing, but the damage is being done here nevertheless.
Last nights news that the giant European investment and commercial bank, UBS has written off $US10 billion in dud subprime assets and raised more, $US11.5 billion from selling shares to new investors to raise new capital, is a sign of just how fraught world markets have become.
UBS is a big investment bank and fund manager in Australia: its capacity to do business will now be constrained.
There's no sign the credit crunch will end soon and it looks like lingering for a while.
The Bank of International Settlements, the central bankers' central bank reckons the credit drought could go on past the end of March next year.
There are a number of big US broking and banking groups due to report over the next month and their financial health will be a big guide to how things end up in 2008.
But for the likes of SP Ausnet, the Singapore controlled Australian electricity group, it won't be enough to suggest the crunch might ease sometime next year.
It announced yesterday that it had abandoned plans to acquire $8.3 billion of former assets of Alinta Ltd from its parent company, Singapore Power.
Singapore Power bought those in conjunction with Babcock and Brown.
SP Ausnet cancelled general meetings of three of its subsidiaries scheduled for today to consider the deal, citing deteriorating capital market conditions as the reason for its decision.
The shares rose 9.5c to close at $1.285 as the increasing uncertainty about the cost of the related party deal was lifted from the company.
"The Board has noted the ongoing deterioration in capital markets, in particular debt capital markets, since the Explanatory Memorandum (relating to the Alinta transaction) was released," it said in a statement yesterday morning.
"Current conditions would have a material impact on the overall transaction metrics, as well as SP AusNet's ability to achieve the forecasts provided in the Explanatory Memorandum.
"The Board and its financial advisers, Pacific Road, therefore consider it is no longer in the best interests of SP AusNet to proceed with the transaction," the company said in a statement to the ASX.
The parent will operate the assets on a stand alone basis but you can bet the deal will be resurrected once credit market conditions improve.
And agricultural chemicals firm Nufarm says it has ceased talks with a Chinese-led consortium over a possible takeover.
The shares fell heavily, down well over 10%, or $2.02 to a close of $14.70 yesterday afternoon.
No reason was given, but the group talking to Nufarm did comprise two US buyout groups who would have had to raise half the money in credit markets for the deal.
Nufarm said the consortium, which included US buyout group, Blackstone and Fox Paine, was unable to formalise its proposal for undisclosed reasons.
The offer was received from the group which also comprised China National Chemical Corporation and was for $17.25 cash for each Nufarm share plus a payment of a pre-acquisition dividend of up to 30C per share.
Nufarm and the consortium entered into an exclusivity deed that expires at midnight tonight, December 10 and Nufarm said the "consortium has advised Nufarm that it will be unable to formalise its proposal prior the expiry of the exclusivity period and, accordingly, discussions between Nufarm and the consortium have ceased".
It's thought that the Chinese group might return when credit market conditions ease. It bought the Quenos chemicals group in April of last year after protracted negotiations.
And Storm Financial, a North Queensland financial advisory firm, pulled its $170 million ASX listing on Friday night when it found little support from institutional shareholders for the issue, even though Westpac floated its BT Funds Management business for more than $200 million. Another financial group float, Olympus Funds Management, was pulled on Friday as well.
The presence of Westpac as a backer and sponsor of the BT float no doubt helped. But investors seemed to judge Storm a bit too expensive, even though it was marketed into a reasonable market on Friday in Australia. BT shares finished at $4.78, a 2c discount to the offer price of $4.80, so the market isn't that certain, even with Westpac still in control with 60%.
And the very establishment Perpetual Funds Management excluded the media from its market update this week with institutional investors.
The funds manager has been doing it tough lately, losing a surprising $18 million in realised and unrealised losses in its Enhanced Cash Fund.
The company has lost $5 million in dud subprime mortgages and been forced to account for another $13 million in adverse interest movements which produced losses.
The upgrade of the loss from $5 million to $18 million has embarrassed the company which has made a lot of money from its Australian equities fund this year, including $1 billion profit on the takeover of
