As we outlined yesterday, Elders Ltd and Babcock and Brown Infrastructure have taken similar routes in trying to get out from under enormous debt burdens and inadequate financial strength.
These directions have included huge issues of new capital: Elders is more advanced and has a lesser problem than BBI which has debts north of $9.1 billion.
The sharemarket reactions yesterday told the story we thought they might.
Elders shares fell heavily, but not that much that the takers of the $550 million in new issues will be swamped with losses on their new and/or increased holdings.
BBI securities also fell heavily and are now at a point where the company is basically broke, in the view of investors.
BBI securities fell 1.6 cents, or more than 26% to 4.5 cents. That values BBI around $125 million.
When you have so much debt and so little sharemarket value only one thing follows and that’s collapse, unless the cornerstone investor BBI talked about on Friday, takes over the whole company.
That’s unlikely because who would want all that debt?
So the banks could end up with all, or some of BBI.
But Elders seems to have a good chance of escaping that fate.
The shares ended down more than 37% at 24.5 cents, or a fall of 14.5 cents on the day from the close of 39 cents before the trading halt was called last week.
That gives the prospect of a profit the shareholders who will take up the $400 million to the professional market and around $150 million to retail shareholders.
Shortly after the market opened, Elders shares had slumped 16.5 cents, or 42%, to 22.5 cents.
Elders will issue new shares at 15 cents each.
And Leighton Holdings, the country’s major contractor seem to have a succession problem for long time CEO, Wal King.
The company issued this brief, one paragraph statement well after trading closed yesterday evening.
"This is to advise that the Leighton Holdings Board and Chief Executive Officer, Mr Wal King, have agreed to amend Mr King’s current employment contract to provide flexibility to extend his employment term beyond 30 June 2010 on the same contractual terms."
No other comment, just that.
Leighton shares closed at $37.14, up 24 cents on the day.
No logical successor has appeared on the scene for Mr King and chairman, David Mortimer and the rest of the board now have a problem if something should happen to Mr King.
Leighton is more than 50% owned by Hochtief of Germany, which in turn is 20% controlled by the ACS group of Spain.
