PRESS DIGEST-Australian Business News - May 20

Reuters: [2008-05-19 23:20:00]

Compiled for Reuters by Media Monitors. Reuters has not verified these stories and does not vouch for their accuracy.

THE AUSTRALIAN FINANCIAL REVIEW (www.afr.com)

--Fairfax Media <FXJ.AX> chief executive David Kirk said yesterday the group would exceed a targeted A$45 million in cost savings and revenue from its A$2.8 billion acquisition of Rural Press last year. Following the takeover, Fairfax closed three printing operations and cut staff in some areas. "Some of the increase comes from continuous improvement programs that wouldn't have been possible without the merger," Mr Kirk said. However, he declined to put a number on the new revenue the group was able to generate. Page 18.

--A joint bid on dairy producer Dairy Farmers by Parmalat Australia <PLT.MI> and Victorian cooperative Murray Goulburn has gained clearance from the Australian Competition and Consumer Commission. The Parmalat-Murray Goulburn consortium is the third party to line up for Dairy Farmers' A$800 million-plus auction, following earlier bids by National Foods and New Zealand's Fonterra. "Given the high level of interest…the board will be methodical in its assessment of available options," Dairy Farmers chief executive Rob Gordon said yesterday. Page 18.

--B&B Infrastructure <BBI.AX>, the flagship fund of investment bank Babcock & Brown, says it is on track to successfully refinance a A$500 million loan due in August. "We are starting to see signs of the debt markets recovering, certainly in our space…[and] it's a refinanceable amount of money," the fund's chief financial officer, Jonathan Sellar, told the Macquarie Global Infrastructure Conference last week. B&B Infrastructure has about A$10 billion in debt across its asset base, with about 10 percent of this falling due in the period to June 2009. Page 19.

--Nine Network executive David Radoczy has been appointed as the first general manager of FreeView, an organisation backed by free-to-air television (TV) networks. The Seven, Nine and Ten networks, along with public broadcasters ABC and SBS, have set up FreeView to promote digital TV channels in the face of competition from pay-TV. Mr Radoczy, who is believed to have been appointed for an initial three months, will join FreeView next week. He has previously worked for the ABC, British-based pay-TV group BSkyB and BBC Enterprises. Page 21.

THE AUSTRALIAN (www.theaustralian.news.com.au)

--Hutchison Telecommunications Australia's <HTX.N> 3 mobile phone business yesterday reported a full-year loss of A$285 million, an improvement on the A$759 million loss in 2006-07. The company announced that the number of subscribers had increased by 9.2 percent to 1.72 million in the four months to April 2008. Canning Fok, managing director of the group's Hong Kong-based parent, Hutchison Whampoa, predicted an operating profit for Hutchinson Australia by the end of the year. Page 19.

--According to listed private health insurer NIB Holdings, its cheapest product is attracting customers for reasons other than private health care. "People who have bought lower-cost products are more likely to have been motivated by tax considerations," managing director Mark Fitzgibbon said yesterday. He revealed that individuals in the 20-29 age group formed the bulk of the 20,000 new members NIB signed up in the second half last year. Page 21.

--Mike Connaghan, the chief executive of marketing and communications group STW has assumed the role of main decision-maker and joined the agency's board. The move follows the announcement by executive chairman Russell Tate at the company's annual general meeting yesterday to step down from an executive role and become deputy chairman. Mr Connaghan told the meeting that STW remained optimistic about achieving its revenue targets for 2008 despite the current market uncertainty. Page 21.

--Chinese zinc and tungsten group Hunan Nonferous Metals said in a bidder's statement yesterday that its takeover offer for West Australian company Abra Mining <AII.AX> was aimed at lifting its stake in the metals explorer to 70 percent from the current 17.8 percent. Hunan has made an all-cash offer for Abra. "Our offer…reinforces our commitment to assist in the development of Abra's 100 percent owned…deposit located within the Mulgul project in central Western Australian," Hunan said. Page 23.

THE SYDNEY MORNING HERALD (www.smh.com.au)

--Troubled general insurer Insurance Australia Group <IAG.AX> (IAG) yesterday rejected rival QBE's <QBE.AX> A$8.7 takeover offer, stating that the suitor's third attempt still "fell short of fair value." But QBE chief executive Frank O'Halloran told the stock exchange that his company "considers its final proposal is fair and reasonable, given IAG's declining profitability in the past three years and its recent profit downgrade." According to analysts, IAG is seeking A$5 per share, which would value it at A$9.45 billion. Page 19.

--The board of St George Bank <SGB.AX> has backed Westpac Banking Corp's <WBC.AX> merger offer to create a A$66 billion entity. St George chairman John Curtis told shareholders yesterday that the scrip-based bid by Westpac, valuing the target at about A$18 billion, was more attractive than any potential rival all-cash offer as it would allow St George to retain its brand, besides being a better financial deal. Analysts said a rival offer from overseas was unlikely, but there was a strong possibility of a competing local bid from National Australia Bank. Page 19.

--West Australian ammonia producer Burrup Holdings yesterday revealed plans for a A$500 million initial public offering. The listing is expected to value Burrup founder Pankaj Oswal's 70 percent stake at up to A$1.7 billion. As part of the float, Mr Oswal will sell down his shareholding to 53 percent, while Norwegian ammonia trader Yara International will reduce its holding to 27 percent from 30 percent. Page 21.

--Poker machine group Aristocrat Leisure <ALL.AX> will pay an estimated A$150 million to A$170 million to settle a class action initiated by investors who argued the company failed to keep the market informed six years ago. If Justice Margaret Stone of the Federal Court approves the deal, it will be a record payout by an Australian company to its shareholders. Aristocrat's insurers are expected to pick up most of the settlement bill. Page 21.

THE AGE (www.theage.com.au)

--Federal Infrastructure Minister Anthony Albanese has made new appointments to the board of advisory body Infrastructure Australia, with half the members coming from the private sector. "This is the first time we've had…direct private sector involvement in a coordinated way, making recommendations to Government," Mr Albanese told Sky News yesterday. The new members include Babcock & Brown senior executive Ross Rolfe, Infrastructure Partnerships Australia chairman Mark Birrell and Sydney Water chief executive Kerry Schott. Page B1.

--Industrial services provider Spotless Group <SPT.AX> yesterday extended its unsolicited takeover offer for property maintenance group Programmed <PRG.AX> to June 13 from May 26. Spotless said it had pushed back the deadline to allow shareholders to consider Programmed's annual results, which are due later this month. Page B2.

--A Committee for Economic Development in Australia meeting in Perth heard yesterday that financial markets would not be surprised by the introduction of a national emissions trading scheme in 2010. "We're well prepared," said ABN Amro director of environmental markets Craig McBurnie. He said the use of Renewable Energy Certificates and Greenhouse Gas Abatement Certificates showed that emissions trading had already commenced. "2010 is the start of compliance but not the start of the market," Mr McBurnie said. Page B3.

--Victorian Minister for Industry and Trade Theo Theophanous last night presented the Victorian Manufacturing Hall of Fame awards. The 11 companies inducted into the Hall of Fame included five automotive component manufacturers. Mr Theophanous said the Government recognised the challenges faced by the manufacturing sector, which contributed A$29.6 billion annually to the state's economy. "The Government will shortly be delivering a comprehensive Victorian industry and manufacturing strategy," he said. Page B3. --

((Sydney Newsroom +61-2 9373 1800; sydney.newsroom@reuters.com)) Keywords: DIGEST AUSTRALIA BUSINESS

US CREDIT-Kraft bonds risk weakness on restructuring

Reuters: [2008-05-19 22:16:00]

    By Karen Brettell 
    NEW YORK, May 19 (Reuters) - Kraft Foods Inc's <KFT.N> 
credit profile risks further deterioration as the food company 
restructures its business, which may include making additional 
acquisitions that are funded by debt. 
    Kraft, the largest North American food maker, on Monday 
sold $2 billion in bonds, around $1.5 billion of which is 
expected to be used to repay a credit facility that was used to 
fund its purchase of Groupe Danone's <DANO.PA> global cookie 
business. 
    The acquisition raised Kraft's leverage, a measure of debt 
to earnings before interest, taxes, depreciation and 
amortization, to a higher level than similarly rated peers, a 
factor reflected in its comparatively wider credit spreads, 
analysts said. 
    "We think there are more downside risks than upside 
potential," said CreditSights analyst Edward Mui. 
    The cost to insure its debt with credit default swaps rose 
to around 77 basis points on Monday, or $77,000 per year to 
insure $10 million in debt, from 74.34 basis points at Friday's 
close, according to Markit Intraday. 
    Kraft is in the midst of a restructuring in which it has 
been making changes to its portfolio, including the Danone 
purchase and separately agreeing to sell its Post Cereals 
business to Ralcorp Holdings Inc <RAH.N>. 
    Billionaire investors Nelson Peltz, Carl Icahn and Warren 
Buffett have all taken equity stakes in Kraft, and agitations 
from them to improve its stock price may come at the expense of 
debt holders, analysts said. 
    Kraft "has been very aggressive on share buybacks and we 
don't have any reason to believe they won't continue to do 
that," said Gimme Credit analyst Craig Hutson. 
    Also, "with the Danone deal they were willing to take on a 
pretty sizable new company and if this management team sees a 
strategic opportunity they couldn't pass up they would probably 
do it, and they would probably finance it predominately with 
debt," he said. 
    
    COMMODITY PRESSURES 
    Kraft is also under pressure to pass on rising costs of 
commodities to the consumer without hurting sales. 
    "The rest of the industry is facing commodity cost 
pressure, but we think Kraft is a little bit more vulnerable 
because it has cheese products and other products that are more 
commodity-like in nature," said CreditSights' Mui. 
    "You have the consumer trading down, they will look for 
cheaper alternatives, and private products like Kraft cheese 
will suffer," he added. 
    Kraft last month posted a drop in first quarter profit 
compared to the previous year, though it beat expectations as 
price increases and new products lifted sales even as costs for 
oil and ingredients such as wheat continued to soar. 
    "The first quarter was arguably better than they've been 
able to show they could do in the past," said Gimme Credit's 
Hutson. 
    "They need to show that they can in fact offset input cost 
inflation and that consumers aren't going to be scared away 
from higher price increases," he said. 
 (Editing by Clive McKeef) 
 ((karen.brettell@thomsonreuters.com; +1 646 223 6274; Reuters 
Messaging: karen.brettell.reuters.com@reuters.net )) 
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guides to Reuters pages, please double click on the symbol: 
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    European corporate bond market report..[EUB/] 
    Credit default swap guide..............<CDSINDEX> 
    Fixed income guide.....................<BONDS> 
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    U.S. municipal bond market report......[MUNI/] 
            
Keywords: MARKETS CREDIT/  
    

UPDATE 2-WTO rules against EU again over bananas

Reuters: [2008-05-19 19:08:00]

(Adds comments from EU official, recasts)

GENEVA, May 19 (Reuters) - The European Union suffered another defeat over its banana import rules on Monday when the World Trade Organisation (WTO) backed a U.S. complaint over long-standing preferences given to former European colonies.

A WTO compliance panel, handing down a judgment in the case brought by the United States, said the EU had failed to implement previous rulings in the case.

This had harmed U.S. trade rights, the panel said, implying that Washington was entitled to demand sanctions from Brussels. Possible sanctions include punitive tariffs on some EU exports to the United States.

An EU official, speaking on condition of anonymity, said the ruling was irrelevant because the preference given to former European colonies was removed as of Jan. 1 this year when the bloc introduced new rules for its trade with those countries.

Cases brought against the EU over its banana imports represent one of the longest-running global trade disputes. Monday's ruling followed a similar ruling a month ago in a case brought by the world's biggest banana exporter Ecuador.

The United States does not export bananas to the EU, but three of the biggest distributors with plantations in Latin America are U.S. multinationals -- Chiquita Brands International Inc <CQB.N>, Del Monte Foods Co <DLM.N> and Dole Food Co.

The case will also be of interest to Irish fruit distributor Fyffes <FFY.I>.

The EU may decide to appeal the ruling.

(Reporting by Jonathan Lynn in Geneva and William Schomberg in Brussels; editing by Keith Weir) ((jonathan.lynn@reuters.com ; +41 22 733 3831; Reuters Messaging: jonathan.lynn.reuters.com@reuters.net ))

Keywords: TRADE WTO/BANANAS

UPDATE 1-WTO EU banana import regime breaks trade rules

Reuters: [2008-05-19 16:35:00]

(adds details and background)

GENEVA, May 19 (Reuters) - The European Union's regime for importing bananas, which gives preferential treatment to fruit from former European colonies, continues to break international trade rules, the World Trade Organisation (WTO) said on Monday.

A WTO compliance panel, handing down a judgment in the case brought by the United States, said the EU had failed to implement previous rulings in the case.

This had harmed U.S. trade rights, the panel said, implying that Washington was entitled to demand sanctions from Brussels.

The ruling marked another defeat for the European Union over its banana imports, one of the longest running global trade disputes, and followed a similar ruling a month ago in a case brought by the world's biggest banana exporter Ecuador.

The United States does not export bananas to the EU, but three of the biggest distributors with plantations in Latin America are U.S. multinationals -- Chiquita Brands International Inc <CQB.N>, Del Monte Foods Co <DLM.N> and Dole Food Co.

The case will also be of interest to Irish fruit distributor Fyffes <FFY.I>. (Reporting by Jonathan Lynn) ((jonathan.lynn@reuters.com ; +41 22 733 3831; Reuters Messaging: jonathan.lynn.reuters.com@reuters.net ))

Keywords: TRADE WTO/BANANAS

WTO EU banana import regime breaks trade rules

Reuters: [2008-05-19 16:18:00]

GENEVA, May 19 (Reuters) - The European Union's regime for importing bananas, which gives preferential treatment to fruit from former European colonies, continues to break international trade rules, the World Trade Organisation (WTO) said on Monday.

A WTO compliance panel, handing down a judgment in the long-running case brought by the United States, said the EU had failed to implement previous rulings in the case. (Reporting by Jonathan Lynn) ((jonathan.lynn@reuters.com ; +41 22 733 3831; Reuters Messaging: jonathan.lynn.reuters.com@reuters.net ))

Keywords: TRADE WTO/BANANAS