You know things are going well when a company is paying more than 2.5 per cent of its market value to retain a CEO who has not clocked up his first year. Maybe the April 1 starting date was not a good omen for Boart Longyear’s newish chief, Richard O’Brien.
The drilling services outfit unveiled more details of a $US5 ($5.6)-million-CEO retention plan with the news of its $US620-million loss for the year and ”certain risks” outlined in the financial report that ”give rise to material uncertainty about the company’s ability to meet its financial obligations as and when they come due”.
Still, ”Abort” Longyear was crowing about O’Brien’s hiring even if we’re not sure he feels the same way. Abort Longyear’s market cap is now below $200 million. O’Brien’s previous gig was at Newmont Mining Corp. Its current market cap is $US11.6 billion.
Still, in a wonderful display of solidarity, O’Brien’s $US5-million ”strategic award” is in cash payments stretching out until April Fools’ Day 2016.
The board said it ”may” seek investor approval to convert part of the grant into options. And, of course, his payments are not guaranteed. We are sure investors will be chatting with chairman Barbara Jeremiah before the AGM.
Payments will be made ”provided that vesting and payment would not result in the company breaching any financial covenants”. In this case, vesting would be deferred until the financial position of the company ”accommodate[s] payment”.’Ernest’ advice
You would not pick Ernest Hemingway as an obvious philosophical influence for the Abbott government’s Commission of Audit.
The head of the team, Tony Shepherd, tossed aside conservative favourites, such as Ayn Rand, in favour of the author in his opening comments at a Senate select committee hearing.
”As a businessman, I recognise that debt, when used imprudently and in excess, can lead to serious problems and to disaster, in some cases. I quote from Hemingway, one of my favourite writers, from his book The Sun also Rises. The hero in that book is asked: ‘How did you go bankrupt?’ He said: ‘Two ways: gradually and then suddenly’. ”
In any case, Hemingway may be a safer bet than one of Rand’s more famous quotes: ”A government is the most dangerous threat to man’s rights: it holds a legal monopoly on the use of physical force against legally disarmed victims.”
We’re sure Shepherd thinks that not all government is bad. Especially if he held on to his 216,383 shares in Transfield Services after stepping down as chairman last year.
The stock jumped 25 per cent after the government handed it a $1.22 billion contract to run immigration detention centres on Nauru and Manus Island.
Say, isn’t Shepherd looking for some cost savings?Vulture capitalists
It appears financial engineering behemoth Blackstone can show the Aussies a thing or two when it comes to the dark arts of profiting from the failure of others.
The group is attracting attention for its surgical skills on Eircom – once a plaything of the now defunct Babcock & Brown group.
A story in The New York Times reports how Blackstone was buying up Eircom’s discounted debt in the lead up to its default in 2012 – the largest in Irish history.
In return for a debt restructure that sheared off most of Eircom’s onerous debt burden, Blackstone received a 25 per cent equity stake in the Irish telco incumbent which was also shorn of a couple of thousand staff.
It did the trick. Analysts now value Eircom at around $US3.3 billion.
Sinn Fein leader Gerry Adams complimented Blackstone with the label ”vulture capitalists” on the floor of Ireland’s parliament, according to the report.
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