Fairfax Quiet On Margin Loan

The Age

Thursday June 26, 2008

Miriam Steffens

FAIRFAX Media has discussed the implications of a margin loan over 159 million shares held by major shareholder and director John B. Fairfax, but made no announcement to the market on the issue.

Marinya Media, a private company controlled by Mr Fairfax, in February took out a margin loan, secured against Fairfax shares, from Commonwealth Bank to buy out his brother, Timothy, and his sisters, Ruth and Sally.

The move means Mr Fairfax's side of the family now has a 14% stake in Fairfax Media.

Marinya confirmed the reshuffle of the family holdings this week after market speculation that recent falls in Fairfax Media's share price could have triggered a margin call.

Short-sellers were believed to have been targeting the owner of The Age for weeks, seeking to push the shares down to a price that would prompt a margin call for Mr Fairfax.

Marinya has dismissed those rumours, stressing that, despite the heavy book losses suffered since the deal, it was a long way from a margin call.

The company is believed to have borrowed $170 million against 159 million of the 211 million Fairfax shares it owns, with a maximum loan-to-valuation ratio of 65%.

That means the stock would have to fall to $1.64 before Mr Fairfax could be margin-called, which would then force him to either top up his loan with the rest of his family's shares, or pay more money into his loan account. If he used the rest of his stake as security, this trigger price would fall to $1.23.

Fairfax Media chairman Ron Walker declined to comment on whether the margin loan hanging over the company's shares was a concern to the board.

BusinessDay has learned from two sources that the issue has been discussed at board level, with the general sentiment being that it was not going to be a problem for the company. Mr Walker would not comment after a scheduled board meeting yesterday.

Mr Fairfax's son, Nicholas, also a Fairfax Media director, said yesterday that Marinya did not want to comment on the issue any further.

"We're a private company, we don't believe that our dealings really should be in the public eye nor is it warranted that they are," he said.

Fairfax shares continued their decline yesterday, closing down 4 at a new five-year low of $2.82 in heavy trading.

© 2008 The Age

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