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Australian Business News - 8th July 2024

Written by BusinessCorp | Jul 7, 2024 3:48:27 PM

Major Overhaul of Australian Bankruptcy Laws Announced

The Albanese government is set to unveil significant changes to personal insolvency laws on 8 July 2024, aimed at creating a fairer system and reducing the stigma associated with bankruptcy.

Key Changes to Bankruptcy Laws

  • Involuntary bankruptcy threshold increased to $20,000
  • Bankruptcy records to be cleared after seven years
  • Response time for bankruptcy notices extended to 28 days
  • Debt agreements no longer considered "an act of bankruptcy"

Attorney-General Mark Dreyfus stated, "These amendments will ensure a fairer outcome for debtors in the personal insolvency system, and reduce the stigma currently associated with entering into bankruptcy."

New "Minimum Asset Procedure" Proposed

The government is also launching consultations for a mini-bankruptcy regime called the "minimum asset procedure". This would allow eligible debtors with less than $50,000 in debt and minimal assets to clear their debts in just one year.

"The Minimal Asset Procedure would clear a person's debts and allow access to a fresh start sooner than bankruptcy, where that person has no other way to pay," Mr Dreyfus explained.

Rising Bankruptcy Rates

Recent statistics show a 20.6% increase in bankruptcies and a 19% rise in debt agreements compared to the previous year. The first nine months of the 2023-24 financial year saw 8,697 personal insolvencies, indicating a 16% year-on-year increase.

These reforms come as part of a broader effort to modernise Australia's insolvency laws, which haven't been comprehensively reviewed since the pre-digital age. The changes aim to balance the needs of debtors and creditors while adapting to the realities of the modern economy.

Anglo American Prepares to Sell Queensland Coal Mines

In a bold move following the rejection of BHP's takeover bid, Anglo American is set to launch the sale process for its Queensland coking coal mines this month. CEO Duncan Wanblad is wasting no time in implementing his strategic vision for the 107-year-old mining giant.

Sale Details and Valuation

Confidentiality agreements are expected to be distributed within the next fortnight, with Morgan Stanley and Goldman Sachs overseeing the process. The assets, comprising five coal mines, are estimated to be worth between $7.4 billion and $11.9 billion AUD, based on analyst consensus.

"The up-for-grabs portfolio delivered $999 million net profit last year and more than $2.83 billion in the previous 12 months."

Challenges and Opportunities

Despite operational issues and a recent coal gas fire at the Grosvenor mine, Anglo American aims to increase annual production from 15-17 million tonnes to 20 million tonnes within two years. The Grosvenor incident, which could impact up to 20% of expected coal output, may affect the final sale price.

Potential Bidders

The sale is likely to attract interest from companies such as Whitehaven Coal, Stanmore Resources, and Asian steelmakers. This mirrors the pool of bidders from BHP's recent $6 billion sale of Blackwater and Daunia mines.

Strategic Restructure

The sale aligns with Wanblad's plan to refocus Anglo American on copper, iron ore, and crop nutrients. By the end of 2025, the company aims to divest or restructure its diamond, platinum, and nickel assets.

As Anglo American moves forward with its transformation, all eyes will be on the outcome of this significant coal asset sale.

Lendlease and Mitsubishi Estate Asia Secure Prime Sydney Site for $500M Development

In a significant move for Sydney's property market, Lendlease and Mitsubishi Estate Asia have acquired a 1,746-square-metre site in Edgecliff for $132.5 million. The partners plan to develop a $500 million mixed-use project at 1 Darling Point Road, showcasing their commitment to premium Australian real estate.

Strategic Location and Development Potential

The site, situated at the corner of New South Head and Darling Point roads, boasts imminent approval for a 46-metre-high project. However, there's potential to increase this to 60 metres if the development includes a 15% affordable housing component, highlighting the project's flexibility and alignment with urban planning objectives.

"It was a COVID buy for us when we put the site together," said Andrew Boyarsky, director of Anka Property Group, the previous owner. "The sale's a great risk-adjusted return for us."

Lendlease's Strategic Shift

This acquisition is part of Lendlease's broader strategy to refocus on the Australian market amidst a retreat from overseas operations. With over half of its existing pipeline concentrated in just two projects - One Sydney Harbour and One Circular Quay - this new development represents a crucial step in diversifying and strengthening its local portfolio.

Market Challenges and Opportunities

The project comes at a time when the Australian property market faces challenges, including rising construction and financing costs. However, Boyarsky notes that premium and luxury projects remain viable in the current environment, positioning this development favourably.

As Lendlease navigates through a period of significant change, including recent divestments and restructuring, this joint venture with Mitsubishi Estate Asia signals a strong commitment to growth in the Australian market.

Federal Court Approves Contingency Fees for Class Actions

In a landmark decision on 7 July 2024, the Federal Court of Australia has ruled that law firms can now run class actions off their own balance sheets and share in damages awards. This controversial practice, known as contingency fees, was previously only allowed in Victoria.

Key Points:

  • Federal Court judgment allows contingency fees nationwide
  • Decision may end Victoria's dominance in class actions
  • Other state supreme courts may follow suit
  • Plaintiff lawyers hail decision as opening new avenues for justice

Liam Burgess, a partner at King & Wood Mallesons, suggests this ruling could reduce "forum shopping" and the flow of cases to Victoria. He added, "Harmonisation of the mechanism for the recovery of costs may have some benefits in avoiding forum shopping."

What are Contingency Fees?

Contingency fees allow lawyers to take on the cost of running a lawsuit and only get paid if successful, with payment coming as a share of damages awarded. This differs from traditional no-win, no-fee agreements where lawyers are paid for their time.

"This will increase access to justice, while also increasing competition in the funding market and in turn placing downward pressure on funding costs, ultimately for the benefit of the applicants and group members," said Craig Allsopp, Shine Lawyers' joint head of class actions.

The court emphasised that such arrangements would require fully informed consent from applicants and class members, with adequate notification and court supervision to manage potential conflicts of interest.

While plaintiff lawyers welcome the decision, Shadow Attorney-General Michaelia Cash expressed concern that Australia is becoming the "class action capital of the world" and called for careful monitoring of the consequences.

Grow Inc Seeks $60 Million in Fresh Capital for Super Admin Expansion

In a bold move to dominate Australia's $3.9 trillion superannuation administration market, fast-growing fintech Grow Inc has launched a $60 million capital raise. The company, which made waves last year by snagging $84 billion super giant HESTA from competitor Link Group, is aiming to scale its operations and integrate new high-profile clients.

Global Interest and Existing Backers

Highbury Partners is spearheading the Series D round, with King & Wood Mallesons providing legal support. Japanese venture capital firm Hitachi Ventures is set to lead the investment, while existing backers ASX, Citigroup Global Markets, AirTree, and Five V Capital are also supporting the raise.

"Grow's progress seems to have been limited so far, with its main existing contract might not be progressing completely to plan," said Nigel Pittaway, a research analyst at Citi.

Innovative Technology and Recent Wins

Grow's DLTA platform, utilising distributed ledger technology, is at the heart of its pitch to super funds. The company has recently secured contracts with Australian Ethical ($10 billion) and NGS Super ($14 billion), adding to its growing portfolio of clients.

The fresh capital will be used for working capital and to transition Grow's seven-odd clients onto its platform. The company has previously raised $22 million in a Tranche 2 Series C round last year and $25 million in 2021.

As Grow Inc continues to expand, industry observers are keenly watching to see if it can transform its impressive client acquisitions into long-term profitability and potentially become one of Australia's next tech unicorns.

Centuria Industrial REIT Secures WA's Largest Industrial Lease Deal for 2024

In a significant move for Western Australia's industrial property sector, Centuria Industrial REIT has inked a deal with AWH, renewing their lease for two sites in Perth's southern suburbs. This agreement, covering 94,241 square metres, marks the largest industrial leasing deal in WA for the 2024 calendar year to date.

Key Details of the Deal

  • AWH, a cotton and wool handling company, has occupied the Bibra Lake premises since 2012
  • The new seven-year lease term begins on 1 August 2025
  • The deal includes sites at 310 Spearwood Avenue and Lot 14 Sudlow Road

Amanda Swan, Centuria's WA asset manager for industrial and agriculture, highlighted the significance of the deal, stating:

"Based on size and scale of the deal, it's definitely a high market rent. What we've been seeing over the last three years is record level of take-up, low vacancy and the market in WA, specifically Perth industrial, seems to be firming."

Impact on Centuria Industrial REIT

This renewal solidifies AWH's position as Centuria Industrial REIT's largest tenant by area, contributing 4% to the REIT's annual rental revenue. The $1.93 billion market-cap REIT's portfolio is 8% weighted to WA, with nine assets valued at approximately $350 million.

Growing Demand for Industrial Property

The deal reflects the ongoing demand for industrial property in Australia. With the country lagging behind the US and Netherlands in refrigerated warehouse capacity, there's potential for further growth in the sector. This trend is evidenced by recent acquisitions and expansions by major players like Frasers Property Industrial in NSW and Victoria.

Melbourne's River Capital Acquires Kiwi Education Giant Aspire2

In a significant move for the Australasian education sector, Melbourne-based River Capital has acquired Aspire2 Group, New Zealand's largest provider of vocational courses to international students. The deal, finalised on 1 July 2024, marks the end of Archer Capital's near-decade-long ownership of the education powerhouse.

A New Chapter for Aspire2

Aspire2, formed in 2015 through the merger of five private education businesses, has grown to become a formidable player in the vocational education landscape. With 44,000 students across 28 campuses and eight private training centres, the company serves both domestic and international markets.

"We're excited about Aspire2's growth potential, particularly in the B2B sector and its expansion into the Australian market," said a spokesperson for River Capital.

Strategic Leadership and Investment

Andrew Larke, former Orica dealmaker and current chair of L1 Capital's long-short fund, will co-invest with River Capital and step in as Aspire2's chairman. This move signals a strong commitment to the company's future growth and strategic direction.

River Capital's Expanding Portfolio

The acquisition of Aspire2 represents River Capital's first private investment of 2024. The Melbourne-based firm, known for its deal-by-deal investment approach, typically targets defensive industries with investments ranging from $20 million to $100 million.

As the Australian education sector continues to evolve, this acquisition positions River Capital and Aspire2 to capitalise on emerging opportunities in vocational training and international education.

Woolworths' Reputation Plummets: A Costly Gamble for Executives

In a stunning turn of events, Woolworths' decision to tie executive bonuses to corporate reputation has backfired spectacularly. The Australian supermarket giant's reputation has taken a nosedive, dropping from 7th to 42nd place in just two years, according to RepTrak's latest figures.

The Costly Consequences

This dramatic fall could cost outgoing CEO Brad Banducci nearly $1 million in long-term incentives. The entire executive team, including incoming boss Amanda Bardwell, will feel the pinch as the reputation metric accounts for 20% of their bonus structure.

"When Woolworths first revealed its intention to tie reputation to corporate bonuses in 2021, investors were sceptical of elevating a 'soft metric' over more traditional measures. There's no risk of that this year!"

Factors Behind the Fall

Several factors have contributed to Woolworths' reputational decline:

  • Cost-of-living pressures
  • Accusations of price gouging
  • Banducci's public relations missteps, including a controversial Four Corners appearance
  • Multiple government inquiries into supermarket practices

Coles Fares Better

In contrast, rival Coles has weathered the storm more effectively, dropping only nine places to 25th in the same period. This disparity highlights the impact of leadership and public relations strategies on corporate reputation.

Looking Ahead

As Woolworths grapples with its reputational challenges, all eyes will be on incoming CEO Amanda Bardwell. Her first task may well be reassessing the company's brand and marketing strategies to rebuild trust with Australian consumers.

Australia and US Join Forces to Tackle Pacific Banking Crisis

In a bid to address the growing concern of Western banks withdrawing from Pacific Island nations, Australia is set to host the inaugural Pacific Banking Forum in Brisbane this week. The event, which will bring together key figures from Australia and the United States, aims to find solutions to this pressing issue that poses potential national security risks.

De-risking: A Growing Threat to Pacific Economies

Western banks have been increasingly 'de-risking' their operations in the Pacific, a practice where financial institutions indiscriminately terminate or restrict business relationships with broad categories of customers. This trend has raised alarms in both Canberra and Washington, prompting swift action.

"Helping to prevent the loss of banking services in the Pacific is vital to the safety, security and economic development of our region," said Treasurer Jim Chalmers.

China's Potential Influence Raises Concerns

While not explicitly stated, the forum also aims to prevent Pacific Island countries from becoming overly reliant on Chinese financial institutions. Recent events, such as Bendigo Bank's delayed withdrawal from Nauru and the Bank of China's interest in filling the void, have heightened these concerns.

Collaborative Efforts for Regional Stability

The forum will bring together government officials and private sector representatives to develop creative solutions for combating de-risking in the Pacific. US Under Secretary of the Treasury, Brian Nelson, emphasised the importance of keeping financial activity within the regulated financial system to support key policy objectives.

As Australia and the US work together to address this critical issue, the outcomes of the Pacific Banking Forum could have far-reaching implications for the economic security and stability of the region.

Australian Businesses Brace for Major Privacy Law Overhaul

As the clock ticks down to August 2024, Australian businesses are scrambling to prepare for sweeping new privacy laws. The changes, set to be introduced by Attorney-General Mark Dreyfus, are being hailed as the most significant privacy reform in decades.

Key Changes and Concerns

The new legislation aims to crack down on doxxing, hate speech, and targeted advertising. It will also broaden the definition of "personal information". However, industry groups are voicing concerns about the lack of clarity surrounding these changes.

"We're like in Hogan's Heroes," Free TV CEO Bridget Fair said. "We know nothing."

The $14 billion digital advertising industry is expected to be heavily impacted, with some experts advising businesses to pause all targeted advertising to ensure compliance.

Industry Reaction

A coalition of media industry groups, including the Australian Association of National Advertisers, Interactive Advertising Bureau, and Free TV, have expressed frustration at the lack of consultation and understanding of the proposed changes.

Josh Faulks, CEO of the AANA, supports the broad goal of boosting privacy but warns against compromising "safe" targeting for vulnerable groups.

Preparing for the Unknown

With key definitions still unclear, businesses are struggling to prepare. The government has commissioned a cost-benefit analysis, but industry groups have criticised it as inadequate.

Despite the uncertainty, the government remains committed to strengthening privacy protections for Australians. Businesses are advised to stay informed and prepare as best they can for the upcoming changes.