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HenryTo
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Location: Houston, Texas & Los Angeles, California
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 Posted: Sun Jun 03, 2007 11:20 pm Post subject: Macquarie Infrastructure Funds |
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An inside look at this "money-making machine." Definitely a must-read:
http://dealbook.blogs.nytimes.com/2007/06/01/weekend-reading-inside-macquaries-money-machine/
| Quote: | Macquarie’s success has prompted infrastructure envy in much bigger rivals. It takes a great deal of profit to inspire Goldman Sachs, Morgan Stanley and scores of private equity firms to follow your business model, after all.
That aggressiveness also shows up in Macquarie’s often-opaque books, which rely on fair-value accounting. Notorious for its use in Enron (and also its proposed use at the Blackstone Group), the approach allows changes in valuation to register as revenue. To book gains then, Mr. Chancellor and Ms. Silva write, Macquarie has only to lower the discount rate or raise expectations of future revenue for its holdings. And it does both often. |
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rffrydr
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HenryTo
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| Posted: Sun Jun 03, 2007 11:44 pm Post subject: |
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One of these days, the market is going to collapse from a failed deal as equity arbitragers unwind their positions - first with the failed deal and then en masse in deals that have not been finalized yet, similar to what occurred on October 13, 1989:
http://en.wikipedia.org/wiki/Friday_the_13th_mini-crash |
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Goodfella
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Joined: 14 Oct 2005
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| Posted: Mon Jun 04, 2007 4:59 am Post subject: |
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OZ hit a new record today despite shanghai  |
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rffrydr
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| Posted: Mon Jun 04, 2007 6:24 am Post subject: |
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Yeah, drags us up but leaves us standing. Shanghai has taught us fearlessness in face of a perpetual rally. Logic and Pride (and money) demands demand we show who's boss. Russia started it. The more you think about it there IS no connection. The more you think about it....
Last night the headline was different: about the aisan rally IN FACE of Shanghai selling. This morning, "Shanghai Spillover Effect" in article that doesn't mention Shanghai!
http://www.marketwatch.com/News/Story/Story.aspx?column=Indications
Let's see what the next 10% does.
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Today is the Tomorrow you worried about Yesterday! |
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HenryTo
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| Posted: Wed Jul 18, 2007 6:23 pm Post subject: |
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Macquarie now on its 15th consecutive year of record-breaking profits:
http://www.bloomberg.com/apps/news?pid=20601087&sid=azKIy6M9zq_U&refer=home
| Quote: | More than 115 million people a year use Macquarie's airports and 1.7 million cars a day travel on its toll roads. Its buses carry 300 million passengers a year, 2.7 million people catch its trains and 6 million use its ferries, the bank said today.
Utilities owned by Macquarie-managed funds supply gas to 6.9 million homes, water to more than 5.2 million houses and electricity to 1.2 million houses. |
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rffrydr
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HenryTo
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| Posted: Tue Oct 16, 2007 9:34 am Post subject: |
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Fortune's Bethany McLean on Macquarie:
http://money.cnn.com/2007/09/17/news/international/macquarie_infrastructure_funds.fortune/index.htm
| Quote: | Macquarie uses debt of as much as 85% to purchase an asset and pay for the necessary capital expenditures. This debt is hard to see, because it doesn't reside on Macquarie's books. You won't even see it by looking at the financial statements for the funds.
Instead, it is held at the asset level. For instance, if you glanced at the financial statements for MIG, you would see debt of A$2.6 billion. But the assets themselves carry another A$8.7 billion of net debt. In part because there is less disclosure on some of Macquarie's other funds, it is impossible to independently calculate how much debt there is across the entire empire.
Over time the debt held by assets has often increased, not decreased, because Macquarie adds to it partly to pay shareholders their promised dividends. That's because the assets themselves don't deliver enough cash. Indeed, if you look at individual assets, from the Skyway to the M6, they may lose money after their interest expense.
So Macquarie borrows more money and uses it to pay the dividend now, much the way a homeowner might take out a home-equity line to pay a credit card bill. "Borrowing future growth to pay investors today bears the hallmarks of a Ponzi scheme," said Chanos.
There isn't anything illegal about what Macquarie is doing. But if the credit market shuts down, as the mortgage market did, and Macquarie can't pay the promised dividend, then the price per share of the fund would likely plunge - leaving the proverbial widows and orphans holding the bag. |
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rffrydr
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| Posted: Wed Oct 17, 2007 9:24 am Post subject: |
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Yes, I'd never put any money on anything that came with one of those corporate paste on smiles. That it comes from an Aussie would be grounds for a short.
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HenryTo
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| Posted: Sat Apr 05, 2008 10:54 pm Post subject: |
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RiskMetrics' scathing report on Macquarie:
http://business.smh.com.au/macquarie-model-blowtorched/20080404-23oy.html
| Quote: | In the most detailed independent research of Macquarie Group and xxx satellites to be published, Risk Metrics critiques the financially-engineered infrastructure model for its high debt levels, high fees, paying distributions out of capital rather than cashflow, overpaying for assets, related-party transactions, booking profits from revaluations, poor disclosure, myriad conflicts of interest, auditor conflicts and other poor corporate governance.
The RiskMetrics research is likely to send shockwaves through the sector and give both state and federal governments cause for concern as governments have mostly privatised public assets via these structures.
RiskMetrics is a leading adviser to institutional investors both in Australia and overseas. They have been a critic for some time of individual transactions, but this is first time they have strung all the pieces together, and raised doubts about the model's viability.
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As an extreme example, it takes xxx & Brown Wind Partners which "had operating cash flow of $14.2 million in the 2006 financial year, but paid distributions totalling $48 million in relation to that year. The distributions were equivalent to 54% of the total cash receipts from customers during the year,'' says the report.
"Even the most mature infrastructure fund of all, Macquarie Infrastructure Group, is no exception.
It had operating cash flow of $306.9 million in the 2006 financial year, but paid distributions totalling $512.9 million in relation to that year.
Furthermore, the distributions were equivalent to 116% of the total toll revenue received during the year.''
The ''stapled'' entities of the infrastructure model "have multiple boards, and are run by an external management company employed under a management agreement providing for substantial fees.
Many of the features of these vehicles appear to make it practically difficult, and possibly expensive, for investors to replace the external manager if dissatisfied with its performance.'' |
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rffrydr
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| Posted: Sun Apr 06, 2008 7:27 am Post subject: |
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| Quote: | | Risk Metrics critiques the financially-engineered infrastructure model for its high debt levels, high fees, paying distributions out of capital rather than cashflow, overpaying for assets, related-party transactions, booking profits from revaluations, poor disclosure, myriad conflicts of interest, auditor conflicts and other poor corporate governance. |
That's a template for the top of the last cycle: all of these were positives then, one beget the other and they all worked together....and, as all extremes become their opposite, they were 
A trader can't afford the luxury of belief--or, in my case, disbelief. 
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rffrydr
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HenryTo
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| Posted: Wed Aug 27, 2008 9:37 am Post subject: |
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| The power of Macquarie in Down Under. Stock has declined 45% and not a single analyst (out of 12 who covers it) has rated or rates the stock a "sell." My guess is that there is more selling to come. |
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