BCS - BrisConnections Unit Trusts

[brty]

Re: Someone is accumulating BCSCA

It has taken long enough for the media to get their collective heads around this, but this type of coverage is accelerating. The politicians will be pursued by the media shortly for their thoughts. It will be a brave politician who sides with the corporates (to bankrupt the M&D's) in this mess.

Will MQG be able to use their 8% in the vote?? I is sort of like a director voting themselves a pay rise. I would have thought abstaining from the vote was appropriate.

brty

 

[James Austin]

Re: Someone is accumulating BCSCA

Now if Bolton's actions are found to be fraudulent, and a court rules that reasonable person would have known at the time that his actions would be fraudulent, then you are in fact a knowing party to fraud - and it is no longer arms length.

I do wonder how a judge could determine what a reasonable person would do; and whether Bolton's actions in any way constituted anything illegal. His first purchase was certainly entirely legitimate (although not necessarily wise) Is it illegal to purchase shares in a company to gain a controlling hand to determine its future? Which is really all that Bolton is presumed to have done.

if you mean by your post, sunder, that it is some how fradulent of Bolton to buy more of BCSCA with the intention of closing the company down, . . . . I wonder!

is it illegal to have such intention?


Bolton's behaviour is synonymous (perhaps) with the behaviour of large companies across the globe who routinely buy other companies, lay-off 1000s of workers, restructure and change the face and format of the original company so that it bares little resemblance to that original company.

The buyer has simply executed their own interests, which it has the right to do by virtue of ownership. Doesnt it?

Isnt Bolton doing the same?

Is it illegal to buy large amounts of stock with the intention of closing the company down, . . . or is that just business!?

 

[Sunder]

Re: Someone is accumulating BCSCA

Let's simplify it.

You PAY someone to take a liability off your hands.

Does this sound to a reasonable person to be a normal off-market share transaction?

 

[James Austin]

Re: Someone is accumulating BCSCA

Let's simplify it.

You PAY someone to take a liability off your hands.

Does this sound to a reasonable person to be a normal off-market share transaction?

i've spent years paying brokers to take liabilities off my hands, they willingly do so, and willingly pass the stock onto another unsuspecting customer . . . its just business

 

[sails]

Re: Someone is accumulating BCSCA

Let's simplify it.

You PAY someone to take a liability off your hands.

Does this sound to a reasonable person to be a normal off-market share transaction?

But then what most would consider "normal" shares don't come with a future negative value and with no apparent warning about the massive debt before the point of sale.

Everything I have read so far seems to indicate that Bolton had a plan (rightly or wrongly is up to the courts) to stay solvent at the time he acquired the shares. Again, all conjecture! The lawyers will have a field day arguing all these finer points...

 

[steve999]

Re: Someone is accumulating BCSCA

Let's simplify it.

You PAY someone to take a liability off your hands.

Does this sound to a reasonable person to be a normal off-market share transaction?

Umm, yes?

I wouldn't pay somebody to take an asset of my hands but a liability I might.

Isn't that the point? The shares were originally valued at $3, now valued at < $2... So what's wrong?

 

[Sunder]

Re: Someone is accumulating BCSCA

Umm, yes?

I wouldn't pay somebody to take an asset of my hands but a liability I might.

Isn't that the point? The shares were originally valued at $3, now valued at < $2... So what's wrong?

Wait, so they're worth $2? You just sold an asset then. Can't have it both ways.

Imagine doing this:

Buy a Ferrari, and encumber it with a loan.

Let it depreciate so that the market value of the car is less than the amount owing

Pay your friend to take it off you legally for $1 - make sure you pay your RTA transfer fees legally.

Your friend then makes no payments on the loan.

As the loan was secured against the car, which you no longer own, the loan company has nothing on you. Your friend loses the car, but that's okay, he only paid $1 for it, and even received a payment from you to take the car.

Can you imagine getting up before a judge and swearing on the bible or the Aussie flag, that you thought what you did was both legal and ethical? Man you have a twisted sense of right and wrong.

And let me guess - we're going to get back to "You can't buy a $500,000 loan on a ferrari for $500 and a click of a mouse button" argument. While that is less than ideal, two wrongs still don't make a right in my eyes.

 

[freddy2]

Re: Someone is accumulating BCSCA

Let's simplify it.

You PAY someone to take a liability off your hands.

Does this sound to a reasonable person to be a normal off-market share transaction?

Yes, given the situation with these securities. If they were able to be traded on the ASX at a negative price (ie pay someone to take shares) they would be. Consider that if after the next payment is made the shares will trade at 60c (for example) then paying someone 40c before the installment is due to take the securities off your hands would be fair.

 

[Sunder]

Re: Someone is accumulating BCSCA

Yes, given the situation with these securities. If they were able to be traded on the ASX at a negative price (ie pay someone to take shares) they would be. Consider that if after the next payment is made the shares will trade at 60c (for example) then paying someone 40c before the installment is due to take the securities off your hands would be fair.

That's actually a great answer.

But now the legal and ethical question comes down to it, that if you're going to do this, and you have, or reasonably should have an idea that the person is intending to default on the liability - even if they claim otherwise - are you responsible for partaking in that transaction?

I'm saying yes, other people are saying no.

 

[steve999]

Re: Someone is accumulating BCSCA

Wait, so they're worth $2? You just sold an asset then. Can't have it both ways.

Imagine doing this:

Buy a Ferrari, and encumber it with a loan.

Let it depreciate so that the market value of the car is less than the amount owing

Pay your friend to take it off you legally for $1 - make sure you pay your RTA transfer fees legally.

Your friend then makes no payments on the loan.

As the loan was secured against the car, which you no longer own, the loan company has nothing on you. Your friend loses the car, but that's okay, he only paid $1 for it, and even received a payment from you to take the car.

Can you imagine getting up before a judge and swearing on the bible or the Aussie flag, that you thought what you did was both legal and ethical? Man you have a twisted sense of right and wrong.

And let me guess - we're going to get back to "You can't buy a $500,000 loan on a ferrari for $500 and a click of a mouse button" argument. While that is less than ideal, two wrongs still don't make a right in my eyes.

If I sold or paid somebody to take the ferrari then I still owe the finance company. Or if the finance company actually owns the ferrari then I can't sell it without their permission... So I don't think the example is the same.

In the BCSCA case we have something like the following:
Let's says BCSCA shares are now worth $1.50
Person A owns 50,000 shares. They need to come up with $100,000 to keep the shares which they don't have, so the shares are a liability.
They do have $25,000. So they can give Person B $25,000 plus the 50,000 shares.

Person B now has 50,000 shares and owes $100,000. He pays $100,000 and for the price of $75,000 has 50,000 shares worth $75,000.

So what's wrong with that?

 

[Sunder]

Re: Someone is accumulating BCSCA

If I sold or paid somebody to take the ferrari then I still owe the finance company. Or if the finance company actually owns the ferrari then I can't sell it without their permission... So I don't think the example is the same.

In the BCSCA case we have something like the following:
Let's says BCSCA shares are now worth $1.50
Person A owns 50,000 shares. They need to come up with $100,000 to keep the shares which they don't have, so the shares are a liability.
They do have $25,000. So they can give Person B $25,000 plus the 50,000 shares.

Person B now has 50,000 shares and owes $100,000. He pays $100,000 and for the price of $75,000 has 50,000 shares worth $75,000.

So what's wrong with that?

There is nothing wrong with that.

But if you knew the other person didn't have $75,000, and had no intention of paying $75,000, and is just going to enjoy your $25,000 and skip the country, are you culpable?

My argument is yes.

Considering the press Bolton had before the off-market transfers happened, it was pretty clear that Bolton was going for a Heads I win, Tails you lose arrangement. He never had, and never will have the millions required, and for him its either I close down the company (I win), or else Macquarie pays the bill (You lose).

Edit: BTW, I believe it is possible to get loans that have no recourse available, if you default. At least it used to be... A friend had one. And the RTA will still allow a car to be legally transfered even if it is encumbered... But the encumberance has priority, so the finance company can take it off the new owner.

 

[sails]

Re: Someone is accumulating BCSCA

...I'm saying yes, other people are saying no.

That will all be answered in due course by the courts.

A quote that caught my eye from this article: http://www.news.com.au/couriermail/story/0,23739,25271039-3122,00.html

But Justice Robson said the court "guards jealously" the rights of citizens who come before it to be heard.
"Mr Sifris contends that Wonate seeks to be heard on behalf of mum-and-dad shareholders," he said.
"This court will not deny citizens that right."

Oh and another interesting article: http://business.brisbanetimes.com.a...-a-role-in-instalment-mess-20090331-9ibx.html

 

[steve999]

Re: Someone is accumulating BCSCA

There is nothing wrong with that.

But if you knew the other person didn't have $75,000, and had no intention of paying $75,000, and is just going to enjoy your $25,000 and skip the country, are you culpable?

My argument is yes.

Edit: BTW, I believe it is possible to get loans that have no recourse available, if you default.

I find it hard to say that the "seller" is culpable. Certainly it is possible, but a random person selling to Bolton I wouldn't count as being culpable. People generally talk about buyer beware, as the buyer is the person who will get any liability associated with the transaction/shares. If Bolton can't afford the payments then he is the one that will be punished. It makes it difficult if the seller must get a sworn statement from the buyer that they can afford the extra payments.

Also, Brisconnections/Macquarie would have known the risks of selling partly paid shares to "mum & dad" investors, ie, they may not have the cash to pay the rest... Not that that is an excuse for other people's actions, but if you can reverse one transaction why not reverse them all they way up the chain until the shares are with their original owners?

As others mentioned, ASX is "limiting" the market by not allowing shares to be traded with negative values, so off market transactions are the only means to do this type of sale.

As for car loans, I've never had one so not sure of the exact details. My understanding was that if the loan was secured against the car, the finance company held the title and so you couldn't just sell the car to somebody else... As for giving somebody a non-recourse loan for a car

 

[sails]

Re: Someone is accumulating BCSCA

...But if you knew the other person didn't have $75,000, and had no intention of paying $75,000, and is just going to enjoy your $25,000 and skip the country, are you culpable?...

Sunder, under this scenario, I agree with you that the answer is yes. But when did Bolton say that? Do you have a link?

From what I read, I understood he was a major shareholder at the time who intended to change the company structure so that the funds would not be required. The courts will decide on this matter, however, this is not abnormal corporate behaviour. When share prices drop to ridiculously low levels, there is always a threat of takeover. It remains a mystery to me why nothing was done to stop unfunded people purchasing these shares.

I have never personally read anywhere where Bolton said he was going to be bankrupted for sure. Please correct me if I have understood it incorrectly...

 

[AlterEgo]

Re: Someone is accumulating BCSCA

But now the legal and ethical question comes down to it, that if you're going to do this, and you have, or reasonably should have an idea that the person is intending to default on the liability - even if they claim otherwise - are you responsible for partaking in that transaction?

I'm saying yes, other people are saying no.

No, of course not! That's entirely the buyers responsibility. Bolton doesn't need to have the money anyhow, as he has an arrangement to sell them before the payment is due. It's not up to the seller to question the buyer of what his motives are before the transaction. That's completely absurd!

People buy and sell things all the time without having the money to buy it outright. Houses for example. If I buy a house worth $500K with my $20K, do I need to buy with the intention of paying it all off? Does the seller need to check my finances before he sells to me to check if I have the money to pay it all off? Of course not! I could be buying with the intention of reselling it at a later date. I'd never need the $500K to do this. Could buy and sell the house with only ever paying out $20K or so. What Bolton is doing is no different.

 

[ghotib]

Re: Someone is accumulating BCSCA

Couple of pieces from Business Spectator that might explain some of the buying in BCSCA. The first one talks about who, the second is more about why. I long ago lost track of the ins and outs of all this and I can't comment on how realistic Gottliebson's discussion is. It's fun for those of us who are not involved though.

http://www.businessspectator.com.au...e-in-BrisConne-$pd20090331-QN3N2?OpenDocument

http://www.businessspectator.com.au...ections-pd20090402-QPSUN?OpenDocument&src=sph

Ghoti

 

[cuttlefish]

Re: Someone is accumulating BCSCA

Also, Brisconnections/Macquarie would have known the risks of selling partly paid shares to "mum & dad" investors, ie, they may not have the cash to pay the rest...

This is an excellent point - using Sunder's logic - BCS should not have been allowed to issue the stock in the first place without first checking that the original purchasing shareholders could pay (i.e from the original public issue).

There is no encumberance on these instalments, no loan 'against them'. The liabiliity lies with the registered owner at the time the instalment falls due. It could be argued that there is no liability on the instalments until the instalments actually fall due.

Also an arms length transaction to me is any transaction where there is no commercial or personal relationship between the two parties. If the two parties are acting independantly then neither party is responsible for the actions of the other party as far as I can see. If this sort of obligation (to check out the finances of a buyer before selling) is going to be applied, then the same rules should be applied to transactions facilitated via the ASX - i.e. if private sellers have this responsibility to check out buyers credentials then ASX facilitated trades should also carry the same obligation otherwise there is a double standard.

Also Sunder I can't believe you are suggesting someone should elect not to sell their stock to somebody on the basis of comments in a newspaper article Boy the commercial world would be in a tizz if we got to that sort of stupidity.

If an independant party chooses to make an offer and buy the shares without coersion or any prior relationship with the seller then why should the seller be liable for the purchasers future actions or intents - its a bone fide sale to my mind. (I'm not a lawyer, accountant etc.).

If somene sells a house, and the purchaser lied on their income statment to obtain the bank finance for the purchase, does the seller have any responsibility for this after settlement? Of course not, the whole business world would collapse if this sort of idiocy was introduced.

The reality is that BCS, by putting this product into a publicly traded market place with no audit of who was becoming holders - was simply doing a bad job of managing the 'loans' they made to the original investors. If they were smart they would have restricted/suspended trading in the units at a higher price so that they didn't end up with this situation where they have 'loaned' the instalment payments to people who cannot pay.

BCS doesn't seem willing to take any responsibility for the state of affairs, neither does Macquarie who's brainchild the product was in the first place (and who were happy to offload to unwitting retail buyers last year but now that those buyers have found a voice, they come back in and repurchase a tranche to block those same unwitting investors).

 

[newpalm]

Re: Someone is accumulating BCSCA

Gets more & more interesting, Bolton just WON the court case:

http://business.watoday.com.au/business/rebel-bolton-wins-briscon-claim-20090402-9kkn.html

 

[sails]

Re: Someone is accumulating BCSCA

Gets more & more interesting, Bolton just WON the court case:

http://business.watoday.com.au/business/rebel-bolton-wins-briscon-claim-20090402-9kkn.html

Well, isn't that interesting
But it's only one hurdle crossed for unit holders - imagine there will be a few more to go...

 

[investorpaul]

Re: Someone is accumulating BCSCA

I wonder if Macbank or other related parties will buy even more BCSCA now to try and block vote. Obviously Macbank has 8% already but they might want to increase it just to be on the safe side.