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Twiggy shaken by the wind in resources sector

THE Lord giveth, the Lord taketh away. Well, some of the time.
Nanjing Night Net

As the great iron ore truck in the sky prepares to unload on Twiggy Forrest’s Fortescue Metals, it’s good to know that even when you’re faced with selling a few assets to keep the banks happy there’s still a payday to look forward to.

Particularly given that Twiggy owns a great swath of Fortescue stock.

Twiggy’s wealth took a hit in the hundreds of millions last week as iron ore prices – and Fortescue’s share price, to which Twiggy’s wealth is inextricably linked – tumbled and concerns were raised about Fortescue’s ability to service its debt.

Twiggy spent about $38 million increasing his stake before the share price was mauled last week as iron ore prices slumped, leading to unpleasant talk about the need to raise capital if those lenders of the odd billion in debt don’t like it.

One can only wonder if an equity raising were to eventuate – and Citi analysts suggest a $500 million capital raising may be necessary – whether Twiggy might use any of the $41 million dividend he will receive to tip into a raising.

Or whether it’s best to hang onto what he still has while he’s got it.

What disclosure?

WHEN Aquila Resources 2011 full-year results were released, the coal and iron ore explorer’s executive pay restraint looked admirable.

In a year when the company reported a near doubling of an annual loss to $64.5 million, Aquila told shareholders that executive chairman and CEO Tony Poli’s salary rose just $14,500 to $572,000. Turns out Tony did a bit better than that, pocketing another $169.4 million. Easy mistake to make.

As the Australian Council of Super Investors pointed out yesterday, Poli had the largest gap between realised pay and reported pay in its latest report card on CEO remuneration on the back of a tidy gain on an exercise of options granted in 2005.

”In December 2010 he exercised 5 million options approved at the 2005 AGM with an exercise price of $4 each and received 19.2 million shares in exchange for a total value at the time of exercise of $169.36 million,” ACSI points out.

There’s no suggestion Aquila has under-reported Poli’s remuneration. We’d hate to appear presumptuous but perhaps the corporate plod might look at pay disclosure requirements.

Note of distinction

A NOTE from the corporate plod straight from the ”we don’t know whether to laugh or cry” files has come to our attention.

The watch-puppy has reminded financial market players of the difference between buffer money and client money. Specifically, it pointed out that ”buffer money is not client money”.

We’d hate to think that means those wearing smart suits and ties at the pointy end of town are having trouble figuring out the subtle difference between what is their money and what is yours.

Market participants regularly deal with large amounts of money relating to financial products on behalf of clients, the Australian Securities and Investments Commission explained. They are required to hold client money in trust accounts for investors who pay them to trade in financial products on their behalf.

”Buffer money is the term used to describe money added by a market participant to the trust account to ensure that the client money trust account has adequate funding,” the plod intoned.

Having pointed out the basic difference, ASIC goes on: ”Buffer money is not client money, as it does not fall within the client money definition in … the Corporations Act, and cannot be considered to be money for the purposes of a client money trust account.”

ASIC adds that the practice of depositing buffer money in a client money trust account is not permitted.

We suspect it’s trying to point out it’s not a good look to use client money to meet funding levels.

Disparate interests

ALIGNING shareholder and management interests may not be easy, but for shareholders at AGL, the contrast is stark enough.

Earnings per share slumped to 24¢ in the year to June from 118.5¢, but that didn’t stop directors giving chief executive Michael Fraser a hefty pay rise – he took home $6.3 million, up from $3.4 million a year earlier.

Still, even using the company’s reckoning of ”underlying” earnings per share of 100¢ for the latest year, up from 91.4¢ a year earlier, Fraser has done very well for himself, although perhaps the proof of the pudding will be in the eating, with the key to shareholders’ prospects lying with the purchase for about $450 million (plus a rather large lump of debt) of Loy Yang A during the year.

Tide’s out

WATCH this space: Steve van Barneveld, boss of Nathan Tinkler’s Hunter Ports, quit last Monday as a director of another Tinkler entity, Ocean Street Holdings, just as it squared off against Mirvac over a small matter of about $17 million it owes the developer for an unfinished property transaction, by order of the Supreme Court.

Van Barneveld’s resignation was effective immediately.

It will be interesting, when the matter reconvenes for a directions hearing in the New South Wales Land and Environment Court this morning, what new evidence Ocean Street seeks to bring as to why it should not have to abide by the umpire’s decision.

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This story Administrator ready to work first appeared on Nanjing Night Net.