Latest news with #JeremyBath
The Advertiser
20 hours ago
- Business
- The Advertiser
What airport mortgage document says about Newcastle, Port Stephens council ties to $235m loan
EXPERTS who reviewed a mortgage document for Newcastle Airport's $235 million loan say both Newcastle and Port Stephens ratepayers could be on the hook for the borrowings, but the councils say the document can not be "relied upon in isolation". The potential risk to ratepayer funds is outlined in a 57-page mortgage document, signed by City of Newcastle chief executive officer Jeremy Bath and Port Stephens Council senior executive Greg Kable in March 2023 and obtained as part of a Newcastle Herald investigation into Newcastle Airport's financial situation. Legal and business law experts consulted by the Herald have identified nine clauses in the publicly available mortgage document that indicate the councils, joint owners of the airport, could be held legally liable for the airport's $235 million Commonwealth Bank loan. In response, airport owners Port Stephens Council and City of Newcastle said in a joint statement earlier this year that the mortgage document could not be "relied upon in isolation to understand the financing arrangements", but declined to elaborate when asked for other relevant documents. In the weeks since the release of the Davidson Review, an independent inquiry into the City of Newcastle's policies, processes and procedures, simmering tensions within the council over the airport have overflowed into a public spat. Labor councillor Declan Clausen has made reference to past comments made by lord mayor Ross Kerridge regarding the financial situation of the airport, accusing the lord mayor of "rewriting history" by deleting past Facebook posts and saying the review showed: "every major decision about the airport was made lawfully, responsibly, and with proper controls and oversight". While not examining the airport's financial situation, the Davidson Review said it was "considered unlikely" that any significant financial risks from the airport would be transferred to the City of Newcastle, without detailing how it came to this conclusion. In the months prior to the review, the Herald had been working to clarify whether ratepayers were exposed to the record $235 million CBA loan facility. When questioned about the possible liability to ratepayers as outlined in the mortgage document, councillors from Newcastle issued what they called an "unprecedented" joint statement. "Councillors were informed in February 2023 that there were a series of legally binding agreements that sat alongside the mortgage of head lease that govern the financial arrangements, including securing the loans against airport assets only, thereby limiting the financier's recourse," the joint statement reads. The councils declined to answer specific questions about clauses in the mortgage that would allow CBA to access council funds if anything goes wrong, and if they are enforceable. They also declined to identify documents that overrule the mortgage to establish that ratepayer funds are off-limits. The airport secured the loan in April 2023 to construct a new international terminal and fund its property development business. While the councils are not parties to the loan or guarantors, they are linked to the deal because they hold the head lease with the Commonwealth for the 28 hectares of land where the airport operates south of Williamtown RAAF Base. The airport can't operate without the lease, so the bank wanted it as security. To ensure the airport could get its $235 million loan, the councils voted unanimously in separate confidential sessions in February 2023 to offer up the head lease as security for the loan. The head lease mortgage document establishes a legal agreement between City of Newcastle, Port Stephens Council, and the CBA. According to the councils, "CBA has confirmed in writing to the airport that the commercial intent of the mortgage of the head leases is limited recourse third party securities". Despite the intent, three experts who reviewed the mortgage said it had the potential to cause heartache for ratepayers if anything goes wrong. When considered in isolation, they said the mortgage gives CBA legal recourse to council funds. Associate Professor Keturah Whitford, dean of staff at the Australian National University's College of Business and Economics, said, "critically, there is nothing in the mortgage which limits the liability of the councils to the realised value of their interests in the airport lease". Professor Whitford, who specialises in business law, reviewed only the mortgage document. She said under the mortgage, the councils agreed to "ensure that no event of default occurs" and to "procure the punctual payment" of the secured money. "While the councils may not be borrowers, guarantors or obligors under the loan facility, the mortgage secures, amongst other things, 'all money which any obligor is or may become actually or contingently liable to pay under or in connection with the finance documents'...," she said. "Further, the council indemnifies the CBA for losses in connection with, among other things, any default." According to the mortgage document, if the airport defaults on a loan payment or interest, the councils could have to pay the money. If CBA cannot recoup money owed from the airport, under the mortgage, the councils have agreed to compensate the bank for any losses, liabilities, costs, expenses and taxes it incurs. Under the mortgage terms, the bank can also enforce its right against the councils before it seeks funds from the airport. If this were to happen, the councils could claim against the airport. It is unknown how much money, if any, the councils could be held responsible for, as the agreement does not put a ceiling on the possible costs. According to the agreement, the councils cannot ask for the mortgage to be discharged until CBA is satisfied that all the secured money has been paid. There is nothing in the mortgage, like a limited recourse provision, to restrict Port Stephens or Newcastle councils' legal liability to the value of the head lease. This means that if the airport could not foot the bill, under the mortgage terms, the councils could have to pay more than the value of the head lease they have mortgaged to settle the airport's debt to CBA. The Herald asked the councils if they were required to ensure there was no default by the airport on its $235 million loan, if the councils were legally liable for the loan or if they had agreed to compensate CBA for any losses, liabilities, costs, expenses and taxes associated with the airport loan. They did not answer the questions. The joint response said the airport entities were independent of the councils regarding legal liability. "As previously explained to the Herald, there are a number of interrelated legal agreements and deeds that reflect the corporate structure of the airport separate to the councils that dictate the operation of the previous loan agreement with ANZ and now with the Commonwealth Bank," it reads. When the Herald asked individual councillors if they knew of any possible risk to ratepayer funds, Newcastle's Labor, Green, Independent, and Liberal councillors joined forces to dispel concerns, minus lord mayor Ross Kerridge and his Independent running mate Peter Gittins. The 11 councillors said they had "independently sought clarity" and "received multiple briefings" about the airport's financial situation. They said the council unanimously endorsed a proposal for the airport to refinance from ANZ to CBA, to increase its loan from $100 million to $235 million at its meeting on 28 February 2023. "The loan is secured solely against the airport's head lease with the Commonwealth Government," the joint statement reads. "This lease is the only security at risk in the unlikely event of a default. This ensures that there is no legal exposure to the councils or to ratepayer funds ... As councillors, we are committed to ensuring governance processes are followed, financial risk is properly understood, and the community is accurately informed." Questions about the mortgage arrangements come after Herald scrutiny of the airport's financial situation revealed the airport was looking to cut staff, had asked Defence to waive its rent, had been in discussions with councils to access a financial injection of up to $40 million, had been diverting millions in cash reserves to prop up its burgeoning property-development arm and was looking to borrow more money. The airport last month announced flights to Perth, and earlier this month said it had secured its first ongoing international service beyond Australasia, with flights direct to Bali. According to an airport spokeswoman, a valuation from last year based on "increases in land value, business growth" and Ernst & Young modelling that was done in 2019 valued the airport at $430 million. The $235 million loan is secured by the head lease and the airport's assets. Newcastle council's Newcastle Airport Partnership Company 1 and Port Stephens Council's Newcastle Airport Partnership Company 3 are the guarantors for the loan. The joint Newcastle councillor statement said Newcastle Airport's company structure was unanimously endorsed by council in November 2012 and approved by the then local government minister. "It was specifically designed to allow the airport to raise debt independently of the councils and to protect ratepayers of its two shareholder councils." First-time Port Stephens councillor Mark Watson urged people to focus on the "positives" about the airport. "We are expecting dividends in the near future, providing well-needed funds to inject into our roads and community projects," he said. "The airport loans have zero impact on councils operations and ratepayers funds." Fellow councillor Paul Le Motte was not on council when the refinancing deal was approved. However, he said he was "comfortable with all I have seen and heard" about the airport's finances and any potential impact on council funds. A leading industry expert's legal review of the mortgage document conducted for the Herald identified nine clauses where the councils could potentially be held legally liable for the airport's loan. He said CBA might have agreed in a separate document to limit its recourse not to make the councils legally liable for the airport's loan. The councils must be a party to the agreement for this to occur. City of Newcastle's Mr Bath and Port Stephens Council's Mr Kable signed the mortgage on behalf of the councils in March 2023. At the time when councillors voted to approve the loan deal, they were told the councils would "not be a borrower, guarantor or obligor under the facility agreement" and that each new agreement the councils had to enter into, including the mortgage, consent deed and financier side deed, was due to the councils holding the head lease. When asked if there was anything in the mortgage, consent deed or financier side deed that would prevent the bank from accessing council funds if anything goes wrong at the airport, the councils said the Herald's "questions referred to only some of the documents in the suite of transaction documents". The councils declined when asked to name the document that limited the bank's ability to access ratepayer funds. "The mortgage of the head leases is just one of a suite of commercial in confidence documents that govern the financial arrangements of the airport's loan facility," they said. "Together, these documents limit the financier's recourse in the highly unlikely event of a default. These documents have existed since 2013 and remain in place under the current loan facility, which was supported by both councils in 2023." It's understood Newcastle Airport's legal counsel prepared the mortgage. Several past and present councillors who spoke to the Herald said they were not informed about any potential risk to council funds. They understood that only the airport was on the hook if the debt was called in. Reaction from the airport and councils, including many elected councillors, to the Herald's reporting about the airport's finances has been swift and dismissive. The reporting has faced a chorus of vocal opposition to publicly discredit the information and distance the councils from the airport's business operations, repeatedly pointing to the airport's independent 10-member board as being responsible for decision-making. As previously reported, the council-controlled partnership boards are the ultimate authority at the airport. Any decision worth more than $1 million must be referred to the partnership boards for approval. Newcastle's representatives on the two partnership boards are Mr Bath and deputy lord mayor Callum Pull, who replaced former lord mayor Nuatali Nelmes this year. General manager Tim Crosdale and Labor mayor Leah Anderson represent Port Stephens. At a Newcastle council meeting in March, after councillors were earlier briefed by Newcastle Airport management, Labor's Deahnna Richardson described concerns about the airport's finances as "deliberate misinformation". Cr Richardson was one of many councillors who took aim at Cr Kerridge during the meeting because, days before, he called for an independent inquiry into the matter and refused to hand over a letter he wrote to Local Government Minister Ron Hoenig. Cr Kerridge, who has declared a conflict of interest in relation to the airport and does not attend briefings, said he was concerned about the discrepancies between the Herald's reporting and the official responses from the councils and the airport. Mr Hoenig dismissed the request, citing concern that Cr Kerridge was "unable to assess what the council's financial arrangements are with a company half owned by his council". Cr Liz Adamczyk described having to clarify what she claimed as "misinformation" about the airport's finances as "tedious" and a "waste of our time". She detailed an "incredible amount of work" that had gone into trying to "course correct", responding to what she called untruthful claims "out in the media". "And what we are doing now, I think, is just ridiculous in having to ask questions to again be clarified for the benefit of correcting that misinformation that is coming from the lord mayor and the Herald," she said. Cr Declan Clausen also criticised media reporting on the airport and Cr Kerridge for requesting the investigation. "I'm deeply concerned that the lord mayor expects that NSW taxpayers, or even worse our own ratepayers, should fund an inquiry into an asset that we own based on nothing more than innuendo that has been published in the media that has been fact checked and responded to by the airport, by the audit office, by our own ARIC [Audit, Risk and Improvement] committee, and proven to be untrue," he said. Cr Clausen was asked to identify who did the fact-checking of the reporting and what was proven to be untrue. In response, he said he was "directly responding to the misinformed claims made by the lord mayor regarding the airport". The Herald stands by its reporting, much of which is based on the airport's own internal reports. EXPERTS who reviewed a mortgage document for Newcastle Airport's $235 million loan say both Newcastle and Port Stephens ratepayers could be on the hook for the borrowings, but the councils say the document can not be "relied upon in isolation". The potential risk to ratepayer funds is outlined in a 57-page mortgage document, signed by City of Newcastle chief executive officer Jeremy Bath and Port Stephens Council senior executive Greg Kable in March 2023 and obtained as part of a Newcastle Herald investigation into Newcastle Airport's financial situation. Legal and business law experts consulted by the Herald have identified nine clauses in the publicly available mortgage document that indicate the councils, joint owners of the airport, could be held legally liable for the airport's $235 million Commonwealth Bank loan. In response, airport owners Port Stephens Council and City of Newcastle said in a joint statement earlier this year that the mortgage document could not be "relied upon in isolation to understand the financing arrangements", but declined to elaborate when asked for other relevant documents. In the weeks since the release of the Davidson Review, an independent inquiry into the City of Newcastle's policies, processes and procedures, simmering tensions within the council over the airport have overflowed into a public spat. Labor councillor Declan Clausen has made reference to past comments made by lord mayor Ross Kerridge regarding the financial situation of the airport, accusing the lord mayor of "rewriting history" by deleting past Facebook posts and saying the review showed: "every major decision about the airport was made lawfully, responsibly, and with proper controls and oversight". While not examining the airport's financial situation, the Davidson Review said it was "considered unlikely" that any significant financial risks from the airport would be transferred to the City of Newcastle, without detailing how it came to this conclusion. In the months prior to the review, the Herald had been working to clarify whether ratepayers were exposed to the record $235 million CBA loan facility. When questioned about the possible liability to ratepayers as outlined in the mortgage document, councillors from Newcastle issued what they called an "unprecedented" joint statement. "Councillors were informed in February 2023 that there were a series of legally binding agreements that sat alongside the mortgage of head lease that govern the financial arrangements, including securing the loans against airport assets only, thereby limiting the financier's recourse," the joint statement reads. The councils declined to answer specific questions about clauses in the mortgage that would allow CBA to access council funds if anything goes wrong, and if they are enforceable. They also declined to identify documents that overrule the mortgage to establish that ratepayer funds are off-limits. The airport secured the loan in April 2023 to construct a new international terminal and fund its property development business. While the councils are not parties to the loan or guarantors, they are linked to the deal because they hold the head lease with the Commonwealth for the 28 hectares of land where the airport operates south of Williamtown RAAF Base. The airport can't operate without the lease, so the bank wanted it as security. To ensure the airport could get its $235 million loan, the councils voted unanimously in separate confidential sessions in February 2023 to offer up the head lease as security for the loan. The head lease mortgage document establishes a legal agreement between City of Newcastle, Port Stephens Council, and the CBA. According to the councils, "CBA has confirmed in writing to the airport that the commercial intent of the mortgage of the head leases is limited recourse third party securities". Despite the intent, three experts who reviewed the mortgage said it had the potential to cause heartache for ratepayers if anything goes wrong. When considered in isolation, they said the mortgage gives CBA legal recourse to council funds. Associate Professor Keturah Whitford, dean of staff at the Australian National University's College of Business and Economics, said, "critically, there is nothing in the mortgage which limits the liability of the councils to the realised value of their interests in the airport lease". Professor Whitford, who specialises in business law, reviewed only the mortgage document. She said under the mortgage, the councils agreed to "ensure that no event of default occurs" and to "procure the punctual payment" of the secured money. "While the councils may not be borrowers, guarantors or obligors under the loan facility, the mortgage secures, amongst other things, 'all money which any obligor is or may become actually or contingently liable to pay under or in connection with the finance documents'...," she said. "Further, the council indemnifies the CBA for losses in connection with, among other things, any default." According to the mortgage document, if the airport defaults on a loan payment or interest, the councils could have to pay the money. If CBA cannot recoup money owed from the airport, under the mortgage, the councils have agreed to compensate the bank for any losses, liabilities, costs, expenses and taxes it incurs. Under the mortgage terms, the bank can also enforce its right against the councils before it seeks funds from the airport. If this were to happen, the councils could claim against the airport. It is unknown how much money, if any, the councils could be held responsible for, as the agreement does not put a ceiling on the possible costs. According to the agreement, the councils cannot ask for the mortgage to be discharged until CBA is satisfied that all the secured money has been paid. There is nothing in the mortgage, like a limited recourse provision, to restrict Port Stephens or Newcastle councils' legal liability to the value of the head lease. This means that if the airport could not foot the bill, under the mortgage terms, the councils could have to pay more than the value of the head lease they have mortgaged to settle the airport's debt to CBA. The Herald asked the councils if they were required to ensure there was no default by the airport on its $235 million loan, if the councils were legally liable for the loan or if they had agreed to compensate CBA for any losses, liabilities, costs, expenses and taxes associated with the airport loan. They did not answer the questions. The joint response said the airport entities were independent of the councils regarding legal liability. "As previously explained to the Herald, there are a number of interrelated legal agreements and deeds that reflect the corporate structure of the airport separate to the councils that dictate the operation of the previous loan agreement with ANZ and now with the Commonwealth Bank," it reads. When the Herald asked individual councillors if they knew of any possible risk to ratepayer funds, Newcastle's Labor, Green, Independent, and Liberal councillors joined forces to dispel concerns, minus lord mayor Ross Kerridge and his Independent running mate Peter Gittins. The 11 councillors said they had "independently sought clarity" and "received multiple briefings" about the airport's financial situation. They said the council unanimously endorsed a proposal for the airport to refinance from ANZ to CBA, to increase its loan from $100 million to $235 million at its meeting on 28 February 2023. "The loan is secured solely against the airport's head lease with the Commonwealth Government," the joint statement reads. "This lease is the only security at risk in the unlikely event of a default. This ensures that there is no legal exposure to the councils or to ratepayer funds ... As councillors, we are committed to ensuring governance processes are followed, financial risk is properly understood, and the community is accurately informed." Questions about the mortgage arrangements come after Herald scrutiny of the airport's financial situation revealed the airport was looking to cut staff, had asked Defence to waive its rent, had been in discussions with councils to access a financial injection of up to $40 million, had been diverting millions in cash reserves to prop up its burgeoning property-development arm and was looking to borrow more money. The airport last month announced flights to Perth, and earlier this month said it had secured its first ongoing international service beyond Australasia, with flights direct to Bali. According to an airport spokeswoman, a valuation from last year based on "increases in land value, business growth" and Ernst & Young modelling that was done in 2019 valued the airport at $430 million. The $235 million loan is secured by the head lease and the airport's assets. Newcastle council's Newcastle Airport Partnership Company 1 and Port Stephens Council's Newcastle Airport Partnership Company 3 are the guarantors for the loan. The joint Newcastle councillor statement said Newcastle Airport's company structure was unanimously endorsed by council in November 2012 and approved by the then local government minister. "It was specifically designed to allow the airport to raise debt independently of the councils and to protect ratepayers of its two shareholder councils." First-time Port Stephens councillor Mark Watson urged people to focus on the "positives" about the airport. "We are expecting dividends in the near future, providing well-needed funds to inject into our roads and community projects," he said. "The airport loans have zero impact on councils operations and ratepayers funds." Fellow councillor Paul Le Motte was not on council when the refinancing deal was approved. However, he said he was "comfortable with all I have seen and heard" about the airport's finances and any potential impact on council funds. A leading industry expert's legal review of the mortgage document conducted for the Herald identified nine clauses where the councils could potentially be held legally liable for the airport's loan. He said CBA might have agreed in a separate document to limit its recourse not to make the councils legally liable for the airport's loan. The councils must be a party to the agreement for this to occur. City of Newcastle's Mr Bath and Port Stephens Council's Mr Kable signed the mortgage on behalf of the councils in March 2023. At the time when councillors voted to approve the loan deal, they were told the councils would "not be a borrower, guarantor or obligor under the facility agreement" and that each new agreement the councils had to enter into, including the mortgage, consent deed and financier side deed, was due to the councils holding the head lease. When asked if there was anything in the mortgage, consent deed or financier side deed that would prevent the bank from accessing council funds if anything goes wrong at the airport, the councils said the Herald's "questions referred to only some of the documents in the suite of transaction documents". The councils declined when asked to name the document that limited the bank's ability to access ratepayer funds. "The mortgage of the head leases is just one of a suite of commercial in confidence documents that govern the financial arrangements of the airport's loan facility," they said. "Together, these documents limit the financier's recourse in the highly unlikely event of a default. These documents have existed since 2013 and remain in place under the current loan facility, which was supported by both councils in 2023." It's understood Newcastle Airport's legal counsel prepared the mortgage. Several past and present councillors who spoke to the Herald said they were not informed about any potential risk to council funds. They understood that only the airport was on the hook if the debt was called in. Reaction from the airport and councils, including many elected councillors, to the Herald's reporting about the airport's finances has been swift and dismissive. The reporting has faced a chorus of vocal opposition to publicly discredit the information and distance the councils from the airport's business operations, repeatedly pointing to the airport's independent 10-member board as being responsible for decision-making. As previously reported, the council-controlled partnership boards are the ultimate authority at the airport. Any decision worth more than $1 million must be referred to the partnership boards for approval. Newcastle's representatives on the two partnership boards are Mr Bath and deputy lord mayor Callum Pull, who replaced former lord mayor Nuatali Nelmes this year. General manager Tim Crosdale and Labor mayor Leah Anderson represent Port Stephens. At a Newcastle council meeting in March, after councillors were earlier briefed by Newcastle Airport management, Labor's Deahnna Richardson described concerns about the airport's finances as "deliberate misinformation". Cr Richardson was one of many councillors who took aim at Cr Kerridge during the meeting because, days before, he called for an independent inquiry into the matter and refused to hand over a letter he wrote to Local Government Minister Ron Hoenig. Cr Kerridge, who has declared a conflict of interest in relation to the airport and does not attend briefings, said he was concerned about the discrepancies between the Herald's reporting and the official responses from the councils and the airport. Mr Hoenig dismissed the request, citing concern that Cr Kerridge was "unable to assess what the council's financial arrangements are with a company half owned by his council". Cr Liz Adamczyk described having to clarify what she claimed as "misinformation" about the airport's finances as "tedious" and a "waste of our time". She detailed an "incredible amount of work" that had gone into trying to "course correct", responding to what she called untruthful claims "out in the media". "And what we are doing now, I think, is just ridiculous in having to ask questions to again be clarified for the benefit of correcting that misinformation that is coming from the lord mayor and the Herald," she said. Cr Declan Clausen also criticised media reporting on the airport and Cr Kerridge for requesting the investigation. "I'm deeply concerned that the lord mayor expects that NSW taxpayers, or even worse our own ratepayers, should fund an inquiry into an asset that we own based on nothing more than innuendo that has been published in the media that has been fact checked and responded to by the airport, by the audit office, by our own ARIC [Audit, Risk and Improvement] committee, and proven to be untrue," he said. Cr Clausen was asked to identify who did the fact-checking of the reporting and what was proven to be untrue. In response, he said he was "directly responding to the misinformed claims made by the lord mayor regarding the airport". The Herald stands by its reporting, much of which is based on the airport's own internal reports. EXPERTS who reviewed a mortgage document for Newcastle Airport's $235 million loan say both Newcastle and Port Stephens ratepayers could be on the hook for the borrowings, but the councils say the document can not be "relied upon in isolation". The potential risk to ratepayer funds is outlined in a 57-page mortgage document, signed by City of Newcastle chief executive officer Jeremy Bath and Port Stephens Council senior executive Greg Kable in March 2023 and obtained as part of a Newcastle Herald investigation into Newcastle Airport's financial situation. Legal and business law experts consulted by the Herald have identified nine clauses in the publicly available mortgage document that indicate the councils, joint owners of the airport, could be held legally liable for the airport's $235 million Commonwealth Bank loan. In response, airport owners Port Stephens Council and City of Newcastle said in a joint statement earlier this year that the mortgage document could not be "relied upon in isolation to understand the financing arrangements", but declined to elaborate when asked for other relevant documents. In the weeks since the release of the Davidson Review, an independent inquiry into the City of Newcastle's policies, processes and procedures, simmering tensions within the council over the airport have overflowed into a public spat. Labor councillor Declan Clausen has made reference to past comments made by lord mayor Ross Kerridge regarding the financial situation of the airport, accusing the lord mayor of "rewriting history" by deleting past Facebook posts and saying the review showed: "every major decision about the airport was made lawfully, responsibly, and with proper controls and oversight". While not examining the airport's financial situation, the Davidson Review said it was "considered unlikely" that any significant financial risks from the airport would be transferred to the City of Newcastle, without detailing how it came to this conclusion. In the months prior to the review, the Herald had been working to clarify whether ratepayers were exposed to the record $235 million CBA loan facility. When questioned about the possible liability to ratepayers as outlined in the mortgage document, councillors from Newcastle issued what they called an "unprecedented" joint statement. "Councillors were informed in February 2023 that there were a series of legally binding agreements that sat alongside the mortgage of head lease that govern the financial arrangements, including securing the loans against airport assets only, thereby limiting the financier's recourse," the joint statement reads. The councils declined to answer specific questions about clauses in the mortgage that would allow CBA to access council funds if anything goes wrong, and if they are enforceable. They also declined to identify documents that overrule the mortgage to establish that ratepayer funds are off-limits. The airport secured the loan in April 2023 to construct a new international terminal and fund its property development business. While the councils are not parties to the loan or guarantors, they are linked to the deal because they hold the head lease with the Commonwealth for the 28 hectares of land where the airport operates south of Williamtown RAAF Base. The airport can't operate without the lease, so the bank wanted it as security. To ensure the airport could get its $235 million loan, the councils voted unanimously in separate confidential sessions in February 2023 to offer up the head lease as security for the loan. The head lease mortgage document establishes a legal agreement between City of Newcastle, Port Stephens Council, and the CBA. According to the councils, "CBA has confirmed in writing to the airport that the commercial intent of the mortgage of the head leases is limited recourse third party securities". Despite the intent, three experts who reviewed the mortgage said it had the potential to cause heartache for ratepayers if anything goes wrong. When considered in isolation, they said the mortgage gives CBA legal recourse to council funds. Associate Professor Keturah Whitford, dean of staff at the Australian National University's College of Business and Economics, said, "critically, there is nothing in the mortgage which limits the liability of the councils to the realised value of their interests in the airport lease". Professor Whitford, who specialises in business law, reviewed only the mortgage document. She said under the mortgage, the councils agreed to "ensure that no event of default occurs" and to "procure the punctual payment" of the secured money. "While the councils may not be borrowers, guarantors or obligors under the loan facility, the mortgage secures, amongst other things, 'all money which any obligor is or may become actually or contingently liable to pay under or in connection with the finance documents'...," she said. "Further, the council indemnifies the CBA for losses in connection with, among other things, any default." According to the mortgage document, if the airport defaults on a loan payment or interest, the councils could have to pay the money. If CBA cannot recoup money owed from the airport, under the mortgage, the councils have agreed to compensate the bank for any losses, liabilities, costs, expenses and taxes it incurs. Under the mortgage terms, the bank can also enforce its right against the councils before it seeks funds from the airport. If this were to happen, the councils could claim against the airport. It is unknown how much money, if any, the councils could be held responsible for, as the agreement does not put a ceiling on the possible costs. According to the agreement, the councils cannot ask for the mortgage to be discharged until CBA is satisfied that all the secured money has been paid. There is nothing in the mortgage, like a limited recourse provision, to restrict Port Stephens or Newcastle councils' legal liability to the value of the head lease. This means that if the airport could not foot the bill, under the mortgage terms, the councils could have to pay more than the value of the head lease they have mortgaged to settle the airport's debt to CBA. The Herald asked the councils if they were required to ensure there was no default by the airport on its $235 million loan, if the councils were legally liable for the loan or if they had agreed to compensate CBA for any losses, liabilities, costs, expenses and taxes associated with the airport loan. They did not answer the questions. The joint response said the airport entities were independent of the councils regarding legal liability. "As previously explained to the Herald, there are a number of interrelated legal agreements and deeds that reflect the corporate structure of the airport separate to the councils that dictate the operation of the previous loan agreement with ANZ and now with the Commonwealth Bank," it reads. When the Herald asked individual councillors if they knew of any possible risk to ratepayer funds, Newcastle's Labor, Green, Independent, and Liberal councillors joined forces to dispel concerns, minus lord mayor Ross Kerridge and his Independent running mate Peter Gittins. The 11 councillors said they had "independently sought clarity" and "received multiple briefings" about the airport's financial situation. They said the council unanimously endorsed a proposal for the airport to refinance from ANZ to CBA, to increase its loan from $100 million to $235 million at its meeting on 28 February 2023. "The loan is secured solely against the airport's head lease with the Commonwealth Government," the joint statement reads. "This lease is the only security at risk in the unlikely event of a default. This ensures that there is no legal exposure to the councils or to ratepayer funds ... As councillors, we are committed to ensuring governance processes are followed, financial risk is properly understood, and the community is accurately informed." Questions about the mortgage arrangements come after Herald scrutiny of the airport's financial situation revealed the airport was looking to cut staff, had asked Defence to waive its rent, had been in discussions with councils to access a financial injection of up to $40 million, had been diverting millions in cash reserves to prop up its burgeoning property-development arm and was looking to borrow more money. The airport last month announced flights to Perth, and earlier this month said it had secured its first ongoing international service beyond Australasia, with flights direct to Bali. According to an airport spokeswoman, a valuation from last year based on "increases in land value, business growth" and Ernst & Young modelling that was done in 2019 valued the airport at $430 million. The $235 million loan is secured by the head lease and the airport's assets. Newcastle council's Newcastle Airport Partnership Company 1 and Port Stephens Council's Newcastle Airport Partnership Company 3 are the guarantors for the loan. The joint Newcastle councillor statement said Newcastle Airport's company structure was unanimously endorsed by council in November 2012 and approved by the then local government minister. "It was specifically designed to allow the airport to raise debt independently of the councils and to protect ratepayers of its two shareholder councils." First-time Port Stephens councillor Mark Watson urged people to focus on the "positives" about the airport. "We are expecting dividends in the near future, providing well-needed funds to inject into our roads and community projects," he said. "The airport loans have zero impact on councils operations and ratepayers funds." Fellow councillor Paul Le Motte was not on council when the refinancing deal was approved. However, he said he was "comfortable with all I have seen and heard" about the airport's finances and any potential impact on council funds. A leading industry expert's legal review of the mortgage document conducted for the Herald identified nine clauses where the councils could potentially be held legally liable for the airport's loan. He said CBA might have agreed in a separate document to limit its recourse not to make the councils legally liable for the airport's loan. The councils must be a party to the agreement for this to occur. City of Newcastle's Mr Bath and Port Stephens Council's Mr Kable signed the mortgage on behalf of the councils in March 2023. At the time when councillors voted to approve the loan deal, they were told the councils would "not be a borrower, guarantor or obligor under the facility agreement" and that each new agreement the councils had to enter into, including the mortgage, consent deed and financier side deed, was due to the councils holding the head lease. When asked if there was anything in the mortgage, consent deed or financier side deed that would prevent the bank from accessing council funds if anything goes wrong at the airport, the councils said the Herald's "questions referred to only some of the documents in the suite of transaction documents". The councils declined when asked to name the document that limited the bank's ability to access ratepayer funds. "The mortgage of the head leases is just one of a suite of commercial in confidence documents that govern the financial arrangements of the airport's loan facility," they said. "Together, these documents limit the financier's recourse in the highly unlikely event of a default. These documents have existed since 2013 and remain in place under the current loan facility, which was supported by both councils in 2023." It's understood Newcastle Airport's legal counsel prepared the mortgage. Several past and present councillors who spoke to the Herald said they were not informed about any potential risk to council funds. They understood that only the airport was on the hook if the debt was called in. Reaction from the airport and councils, including many elected councillors, to the Herald's reporting about the airport's finances has been swift and dismissive. The reporting has faced a chorus of vocal opposition to publicly discredit the information and distance the councils from the airport's business operations, repeatedly pointing to the airport's independent 10-member board as being responsible for decision-making. As previously reported, the council-controlled partnership boards are the ultimate authority at the airport. Any decision worth more than $1 million must be referred to the partnership boards for approval. Newcastle's representatives on the two partnership boards are Mr Bath and deputy lord mayor Callum Pull, who replaced former lord mayor Nuatali Nelmes this year. General manager Tim Crosdale and Labor mayor Leah Anderson represent Port Stephens. At a Newcastle council meeting in March, after councillors were earlier briefed by Newcastle Airport management, Labor's Deahnna Richardson described concerns about the airport's finances as "deliberate misinformation". Cr Richardson was one of many councillors who took aim at Cr Kerridge during the meeting because, days before, he called for an independent inquiry into the matter and refused to hand over a letter he wrote to Local Government Minister Ron Hoenig. Cr Kerridge, who has declared a conflict of interest in relation to the airport and does not attend briefings, said he was concerned about the discrepancies between the Herald's reporting and the official responses from the councils and the airport. Mr Hoenig dismissed the request, citing concern that Cr Kerridge was "unable to assess what the council's financial arrangements are with a company half owned by his council". Cr Liz Adamczyk described having to clarify what she claimed as "misinformation" about the airport's finances as "tedious" and a "waste of our time". She detailed an "incredible amount of work" that had gone into trying to "course correct", responding to what she called untruthful claims "out in the media". "And what we are doing now, I think, is just ridiculous in having to ask questions to again be clarified for the benefit of correcting that misinformation that is coming from the lord mayor and the Herald," she said. Cr Declan Clausen also criticised media reporting on the airport and Cr Kerridge for requesting the investigation. "I'm deeply concerned that the lord mayor expects that NSW taxpayers, or even worse our own ratepayers, should fund an inquiry into an asset that we own based on nothing more than innuendo that has been published in the media that has been fact checked and responded to by the airport, by the audit office, by our own ARIC [Audit, Risk and Improvement] committee, and proven to be untrue," he said. Cr Clausen was asked to identify who did the fact-checking of the reporting and what was proven to be untrue. In response, he said he was "directly responding to the misinformed claims made by the lord mayor regarding the airport". The Herald stands by its reporting, much of which is based on the airport's own internal reports. EXPERTS who reviewed a mortgage document for Newcastle Airport's $235 million loan say both Newcastle and Port Stephens ratepayers could be on the hook for the borrowings, but the councils say the document can not be "relied upon in isolation". The potential risk to ratepayer funds is outlined in a 57-page mortgage document, signed by City of Newcastle chief executive officer Jeremy Bath and Port Stephens Council senior executive Greg Kable in March 2023 and obtained as part of a Newcastle Herald investigation into Newcastle Airport's financial situation. Legal and business law experts consulted by the Herald have identified nine clauses in the publicly available mortgage document that indicate the councils, joint owners of the airport, could be held legally liable for the airport's $235 million Commonwealth Bank loan. In response, airport owners Port Stephens Council and City of Newcastle said in a joint statement earlier this year that the mortgage document could not be "relied upon in isolation to understand the financing arrangements", but declined to elaborate when asked for other relevant documents. In the weeks since the release of the Davidson Review, an independent inquiry into the City of Newcastle's policies, processes and procedures, simmering tensions within the council over the airport have overflowed into a public spat. Labor councillor Declan Clausen has made reference to past comments made by lord mayor Ross Kerridge regarding the financial situation of the airport, accusing the lord mayor of "rewriting history" by deleting past Facebook posts and saying the review showed: "every major decision about the airport was made lawfully, responsibly, and with proper controls and oversight". While not examining the airport's financial situation, the Davidson Review said it was "considered unlikely" that any significant financial risks from the airport would be transferred to the City of Newcastle, without detailing how it came to this conclusion. In the months prior to the review, the Herald had been working to clarify whether ratepayers were exposed to the record $235 million CBA loan facility. When questioned about the possible liability to ratepayers as outlined in the mortgage document, councillors from Newcastle issued what they called an "unprecedented" joint statement. "Councillors were informed in February 2023 that there were a series of legally binding agreements that sat alongside the mortgage of head lease that govern the financial arrangements, including securing the loans against airport assets only, thereby limiting the financier's recourse," the joint statement reads. The councils declined to answer specific questions about clauses in the mortgage that would allow CBA to access council funds if anything goes wrong, and if they are enforceable. They also declined to identify documents that overrule the mortgage to establish that ratepayer funds are off-limits. The airport secured the loan in April 2023 to construct a new international terminal and fund its property development business. While the councils are not parties to the loan or guarantors, they are linked to the deal because they hold the head lease with the Commonwealth for the 28 hectares of land where the airport operates south of Williamtown RAAF Base. The airport can't operate without the lease, so the bank wanted it as security. To ensure the airport could get its $235 million loan, the councils voted unanimously in separate confidential sessions in February 2023 to offer up the head lease as security for the loan. The head lease mortgage document establishes a legal agreement between City of Newcastle, Port Stephens Council, and the CBA. According to the councils, "CBA has confirmed in writing to the airport that the commercial intent of the mortgage of the head leases is limited recourse third party securities". Despite the intent, three experts who reviewed the mortgage said it had the potential to cause heartache for ratepayers if anything goes wrong. When considered in isolation, they said the mortgage gives CBA legal recourse to council funds. Associate Professor Keturah Whitford, dean of staff at the Australian National University's College of Business and Economics, said, "critically, there is nothing in the mortgage which limits the liability of the councils to the realised value of their interests in the airport lease". Professor Whitford, who specialises in business law, reviewed only the mortgage document. She said under the mortgage, the councils agreed to "ensure that no event of default occurs" and to "procure the punctual payment" of the secured money. "While the councils may not be borrowers, guarantors or obligors under the loan facility, the mortgage secures, amongst other things, 'all money which any obligor is or may become actually or contingently liable to pay under or in connection with the finance documents'...," she said. "Further, the council indemnifies the CBA for losses in connection with, among other things, any default." According to the mortgage document, if the airport defaults on a loan payment or interest, the councils could have to pay the money. If CBA cannot recoup money owed from the airport, under the mortgage, the councils have agreed to compensate the bank for any losses, liabilities, costs, expenses and taxes it incurs. Under the mortgage terms, the bank can also enforce its right against the councils before it seeks funds from the airport. If this were to happen, the councils could claim against the airport. It is unknown how much money, if any, the councils could be held responsible for, as the agreement does not put a ceiling on the possible costs. According to the agreement, the councils cannot ask for the mortgage to be discharged until CBA is satisfied that all the secured money has been paid. There is nothing in the mortgage, like a limited recourse provision, to restrict Port Stephens or Newcastle councils' legal liability to the value of the head lease. This means that if the airport could not foot the bill, under the mortgage terms, the councils could have to pay more than the value of the head lease they have mortgaged to settle the airport's debt to CBA. The Herald asked the councils if they were required to ensure there was no default by the airport on its $235 million loan, if the councils were legally liable for the loan or if they had agreed to compensate CBA for any losses, liabilities, costs, expenses and taxes associated with the airport loan. They did not answer the questions. The joint response said the airport entities were independent of the councils regarding legal liability. "As previously explained to the Herald, there are a number of interrelated legal agreements and deeds that reflect the corporate structure of the airport separate to the councils that dictate the operation of the previous loan agreement with ANZ and now with the Commonwealth Bank," it reads. When the Herald asked individual councillors if they knew of any possible risk to ratepayer funds, Newcastle's Labor, Green, Independent, and Liberal councillors joined forces to dispel concerns, minus lord mayor Ross Kerridge and his Independent running mate Peter Gittins. The 11 councillors said they had "independently sought clarity" and "received multiple briefings" about the airport's financial situation. They said the council unanimously endorsed a proposal for the airport to refinance from ANZ to CBA, to increase its loan from $100 million to $235 million at its meeting on 28 February 2023. "The loan is secured solely against the airport's head lease with the Commonwealth Government," the joint statement reads. "This lease is the only security at risk in the unlikely event of a default. This ensures that there is no legal exposure to the councils or to ratepayer funds ... As councillors, we are committed to ensuring governance processes are followed, financial risk is properly understood, and the community is accurately informed." Questions about the mortgage arrangements come after Herald scrutiny of the airport's financial situation revealed the airport was looking to cut staff, had asked Defence to waive its rent, had been in discussions with councils to access a financial injection of up to $40 million, had been diverting millions in cash reserves to prop up its burgeoning property-development arm and was looking to borrow more money. The airport last month announced flights to Perth, and earlier this month said it had secured its first ongoing international service beyond Australasia, with flights direct to Bali. According to an airport spokeswoman, a valuation from last year based on "increases in land value, business growth" and Ernst & Young modelling that was done in 2019 valued the airport at $430 million. The $235 million loan is secured by the head lease and the airport's assets. Newcastle council's Newcastle Airport Partnership Company 1 and Port Stephens Council's Newcastle Airport Partnership Company 3 are the guarantors for the loan. The joint Newcastle councillor statement said Newcastle Airport's company structure was unanimously endorsed by council in November 2012 and approved by the then local government minister. "It was specifically designed to allow the airport to raise debt independently of the councils and to protect ratepayers of its two shareholder councils." First-time Port Stephens councillor Mark Watson urged people to focus on the "positives" about the airport. "We are expecting dividends in the near future, providing well-needed funds to inject into our roads and community projects," he said. "The airport loans have zero impact on councils operations and ratepayers funds." Fellow councillor Paul Le Motte was not on council when the refinancing deal was approved. However, he said he was "comfortable with all I have seen and heard" about the airport's finances and any potential impact on council funds. A leading industry expert's legal review of the mortgage document conducted for the Herald identified nine clauses where the councils could potentially be held legally liable for the airport's loan. He said CBA might have agreed in a separate document to limit its recourse not to make the councils legally liable for the airport's loan. The councils must be a party to the agreement for this to occur. City of Newcastle's Mr Bath and Port Stephens Council's Mr Kable signed the mortgage on behalf of the councils in March 2023. At the time when councillors voted to approve the loan deal, they were told the councils would "not be a borrower, guarantor or obligor under the facility agreement" and that each new agreement the councils had to enter into, including the mortgage, consent deed and financier side deed, was due to the councils holding the head lease. When asked if there was anything in the mortgage, consent deed or financier side deed that would prevent the bank from accessing council funds if anything goes wrong at the airport, the councils said the Herald's "questions referred to only some of the documents in the suite of transaction documents". The councils declined when asked to name the document that limited the bank's ability to access ratepayer funds. "The mortgage of the head leases is just one of a suite of commercial in confidence documents that govern the financial arrangements of the airport's loan facility," they said. "Together, these documents limit the financier's recourse in the highly unlikely event of a default. These documents have existed since 2013 and remain in place under the current loan facility, which was supported by both councils in 2023." It's understood Newcastle Airport's legal counsel prepared the mortgage. Several past and present councillors who spoke to the Herald said they were not informed about any potential risk to council funds. They understood that only the airport was on the hook if the debt was called in. Reaction from the airport and councils, including many elected councillors, to the Herald's reporting about the airport's finances has been swift and dismissive. The reporting has faced a chorus of vocal opposition to publicly discredit the information and distance the councils from the airport's business operations, repeatedly pointing to the airport's independent 10-member board as being responsible for decision-making. As previously reported, the council-controlled partnership boards are the ultimate authority at the airport. Any decision worth more than $1 million must be referred to the partnership boards for approval. Newcastle's representatives on the two partnership boards are Mr Bath and deputy lord mayor Callum Pull, who replaced former lord mayor Nuatali Nelmes this year. General manager Tim Crosdale and Labor mayor Leah Anderson represent Port Stephens. At a Newcastle council meeting in March, after councillors were earlier briefed by Newcastle Airport management, Labor's Deahnna Richardson described concerns about the airport's finances as "deliberate misinformation". Cr Richardson was one of many councillors who took aim at Cr Kerridge during the meeting because, days before, he called for an independent inquiry into the matter and refused to hand over a letter he wrote to Local Government Minister Ron Hoenig. Cr Kerridge, who has declared a conflict of interest in relation to the airport and does not attend briefings, said he was concerned about the discrepancies between the Herald's reporting and the official responses from the councils and the airport. Mr Hoenig dismissed the request, citing concern that Cr Kerridge was "unable to assess what the council's financial arrangements are with a company half owned by his council". Cr Liz Adamczyk described having to clarify what she claimed as "misinformation" about the airport's finances as "tedious" and a "waste of our time". She detailed an "incredible amount of work" that had gone into trying to "course correct", responding to what she called untruthful claims "out in the media". "And what we are doing now, I think, is just ridiculous in having to ask questions to again be clarified for the benefit of correcting that misinformation that is coming from the lord mayor and the Herald," she said. Cr Declan Clausen also criticised media reporting on the airport and Cr Kerridge for requesting the investigation. "I'm deeply concerned that the lord mayor expects that NSW taxpayers, or even worse our own ratepayers, should fund an inquiry into an asset that we own based on nothing more than innuendo that has been published in the media that has been fact checked and responded to by the airport, by the audit office, by our own ARIC [Audit, Risk and Improvement] committee, and proven to be untrue," he said. Cr Clausen was asked to identify who did the fact-checking of the reporting and what was proven to be untrue. In response, he said he was "directly responding to the misinformed claims made by the lord mayor regarding the airport". The Herald stands by its reporting, much of which is based on the airport's own internal reports.
The Advertiser
21-04-2025
- Politics
- The Advertiser
'Threatening, defaming, homophobic': CEO calls out comments on lord mayor's Facebook
CITY of Newcastle chief executive Jeremy Bath says some council staff were "obsessively reading" comments left on lord mayor Ross Kerridge's now-deleted Facebook post that claimed staff waged an "insidious campaign of bullying" against his wife.
