Tricom Seeks A Saviour

Sydney Morning Herald

Friday February 15, 2008

Stuart Washington and Michael West

TRICOM EQUITIES is seeking a big cash injection, announcing it is talking to potential "merger partners" for the rapidly dwindling margin lending and stockbroking firm.

Late yesterday it confirmed talks were taking place, but a spokeswoman denied market rumours that the recently listed brokerage Bell Financial Group had bought the brokerage business for $1.

In a separate development, the ASX wants to hand over policing of short selling to the corporate watchdog after the near-disaster involving Tricom.

In a statement, the managing director of Tricom, Lance Rosenberg, said: "We have been in discussions with several parties who have shown interest in Tricom. We do not yet have an agreement with any party."

A spokeswoman for Tricom said the cash injection was designed to help expand the business and denied it raised concerns about Tricom's solvency.

Tricom was at the centre of a market seizure when it delayed settlements on the ASX for two days three weeks ago.

It has been forced to rapidly leave the margin lending business after facing problems with its own bankers, cutting its margin lending book from more than $2 billion in June last year to $780 million most recently.

Mr Rosenberg said steps it had taken included reducing its lending book and reviewing Tricom's financial and operational risk management.

Reflecting the fire-sale nature of Tricom's situation, it is understood a proposal from the veteran stockbroker Colin Bell, executive chairman of Bell Financial Group, includes an offer to take over Tricom's broking business for a nominal amount. Mr Bell famously bought the troubled Johnson Taylor Potter brokerage for a reputed $1 in 2001.

The ASX's chief supervision officer, Eric Mayne, foreshadowed sweeping changes in market regulation yesterday in the wake of the Tricom problems.

These included the Australian Securities and Investments Commission taking over the ASX's policing of "short selling", which has hammered some companies' share prices, and imposing new conditions on disclosing the extent of margin loans over directors' shareholdings.

Tricom's complex business model of on-lending stock it owned through margin lending agreements caused delays in settlements on the entire exchange over two days and created substantial market volatility. The problems led to speculation about Tricom's solvency.

The ASX indicated that its review of Tricom's problems would involve scrutinising the stockbrokers' activities more broadly.

The managing director of the ASX, Robert Elstone, said it had not mishandled the issue and described criticisms as uninformed.

Mr Elstone dismissed as "a nonsense" criticisms that the ASX's profit motive was compromising its supervisory role, arguing that the long-term shareholder value of the ASX depended on operating markets of maximum integrity.

The ASX yesterday reported a bumper interim profit increase of 35 per cent to $187 million from the previous corresponding period. This was driven by strong market activity. The result came in slightly above analysts' consensus forecasts for the half, but ASX shares fell 34c, or less than 1 per cent, to $45.13.

© 2008 Sydney Morning Herald

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