Fairfax Moves To Unwind Margin Loan
Sydney Morning Herald
Saturday June 28, 2008
THE Fairfax Media director John B. Fairfax has unwound a margin loan over 159 million of the publisher's shares, which was believed to have prompted short-sellers to target the stock over recent weeks.
Marinya Media, a private company controlled by Mr Fairfax, repaid the loan of about $170 million this week, meaning there is no longer a charge against its Fairfax shares, documents filed with the Australian Securities and Investments Commission on Thursday show. Marinya Media owns 14 per cent of Fairfax, the publisher of the Herald. Mr Fairfax's son Nick, who is also a Fairfax director and the managing director of Marinya Media, yesterday confirmed the unravelling of the margin loan. "It was our initiative; we have been putting this into place for a while now," he said, dismissing suggestions that the move may have been on the urging of Fairfax's board this week. "Obviously these things take a long time to plan for; it's not a small thing you can do in 24 hours or in a week." The margin loan had been taken out in March as short-term financing to reorganise the family's holdings in Marinya and had been refinanced, Nick Fairfax said. He would not comment on how Marinya had raised the funds to repay its lender, the Commonwealth Bank. The Fairfax board met this week, but its chairman, Ron Walker, declined to say whether the margin loan had been discussed.The Herald has been told by two sources that the matter has been raised at board level, with expectations it was not going to be a problem for the company. Fairfax shares closed 1c lower at $2.90 yesterday, having lost 38 per cent this year. Asked whether the share price slump had prompted the unwinding of the loan, Nick Fairfax said that "obviously" impacted on the environment, but "we were planning to do it anyway". Marinya Media entered the original margin loan in February to buy back the shares of Mr Fairfax's brother Timothy and sisters Sally and Ruth, giving John B. Fairfax's side of the family full control of the private company and its stake in Fairfax. The loan was secured against 159 million of its 211 million Fairfax shares. With the shares trading around $4.05 at the time of the deal, John B. Fairfax is believed to have suffered a book loss of about $150 million from taking on his siblings' holdings. There was market speculation in recent weeks that short sellers had targeted Fairfax Media's stock to push it down to a level that would trigger a margin call for Marinya. But Patrick Joyce, investment director at Marinya, said yesterday the private company's debt levels had always been conservative and that "at no time" was there any danger of Marinya - or Fairfax Media with it - being hit by a margin call. With a maximum loan-to-valuation ratio of 65 per cent, the stock would have had to fall to $1.64 before Marinya could have been margin-called. If Mr Fairfax had decided to top up the loan with the rest of his 211 million shares, that trigger price would have declined to $1.23.
© 2008 Sydney Morning Herald
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