Balance sheets (updated)
I just took a look at the share offer document for QR National, and discovered the interesting fact that the company has only $500 million in debt. Looking at the 2009-10 accounts, QR had debt of $7 billion. Of this, $4.3 billion in debt was allocated to QR National, when QR was restructured.
The offer document shows that this was followed by
a restructure of borrowings under which $4.3bn of borrowings from QTC will be transferred to the State under Transfer Notice for nil consideration prior to Settlement (emphasis added)
That is, to sweeten the sale offer, the government has taken $4.3 billion of QR debt onto its own books. It looks as if the government will only sell about 60 per cent of the shares and the price will be at the low end of the indicative range, so the cash proceeds of the IPO will be something like $3.6 billion. That is, it appears that the additional debt taken on by the state as part of the sale will offset nearly all of the sale proceeds assuming a good outcome, and will more than offset the proceeds if the IPO goes poorly. To be sure, the state will still have 40 per cent equity in QR National worth about $2.4 billion, as it did before, but it does not appear that there will be any money at all for schools and hospitals, even on the spurious cash accounting favored by the government.
I’m now fairly confident my analysis is correct. However, I’d welcome correction from anyone who has better info.
Postscript: Another way of looking at this is that the old QR had a gearing ratio of about 65 per cent, so the government’s equity was equal to about 35 per cent of the total capital value. Having taken all the debt onto its own books, the government will sell about the same proportion of the company (now all equity), so its net worth is essentially unchanged, as is the financial position of the general government sector. All that has happened is that QR’s debt has been converted into private equity.