Along the way, about $1 billion in underwriting fees has been siphoned off by investment bankers, a fee bonanza for one of the best-paid professions predominantly transferred from superannuation investors. But the widespread disaster if this cash had not been found is difficult to imagine. Breached loan covenants. Collapses. More panic. And the same pile of money points to a robust path forward for the Australian market, in sharp contrast to the parlous debt-burdened state of many corporations on the British and American markets. Reasons for the unexpectedly upbeat position corporate Australia now finds itself in are twofold – and both are more than a little perverse. First, Australia's wave of 9 per cent of wages paid as superannuation cash, which continues to slosh into funds every week in fair weather or foul, helped save the captains of industry.

In effect, the workers' paradise of compulsory superannuation built by the ACTU and the Keating Labor government provided the mother of all bail-out funds for an over-geared, over-risky corporate sector. (The business lobby should think about that next time it makes a submission opposing an increase in workers' wages.) Second – and here's the real perversity – the super-smooth investment bankers who were the handmaidens of all that corporate overreaching turned out to be pretty handy when the crunch came. This handiness is shown in the annual East Coles Investment Banking survey of more than 100 Australian corporates on their views on their investment bankers, which the Herald publishes exclusively today. It shows 79 per cent of companies felt their investment bankers had added value to their business in the past five years.

One respondent answered the question in the following way: “For 4 years NO. For last year YES.” In their survey responses, companies showed almost slavish gratitude to an industry that has been rightly blamed for being at the heart of the global meltdown in the first place. In the surveys, companies rated UBS the best overall investment bank, followed by Macquarie and Goldman Sachs JBWere. And while the capital raisings happened with a degree of bastardry towards Australia's retail shareholders, the alternative of no capital raising at all may have been much, much worse. “You were in a market where you don't know when you come in whether it's going to be up 6 per cent or down seven,” says Guy Fowler, investment banking co-head of UBS.

“You can't hang around, if the company says it wants to raise a billion dollars.” Peter Hunt, the executive chairman of the advisory firm Caliburn, says he is not surprised investment banks proved so efficient in the capital raisings, with self-interest a primary motivator. “You can criticise investment banks for a whole host of reasons for what happened in the broader financial crisis,” he says. “But they are full of determined, hungry, focused individuals and they are looking for positions in the markets where they can make money for their companies. Capital raising was where they could make a lot of money for their companies.” Add it up. Take an underwriting fee of a conservative 1.5 per cent on $US61 billion and you get $US915 million in fees.

At the top end of town there is little hiding the significance with which the banking community views the importance of the worker-inspired superannuation fund money. Kevin Skelton, the managing director of Merrill Lynch, has little doubt Australia's superannuation money was a shock absorber for Australia's markets. “Why is it you are able to raise capital very quickly in Australia? It's because – we all understand this – the superannuation and savings market in Australia is mature, it's well established, so there is sufficient market money within funds to put to work in the equity markets,” he says. “I think that was an important element for Australia in the context of the GFC. It was absolutely an absorber of shock because unless a number of these companies [recapitalised] they were either going to go bankrupt or run into serious trouble.” UBS's Fowler is similarly clear about where the money was coming from.

“If you look at all of the capital raisings we have done in the past 18 months, up until six months ago the vast majority of support was from Australian institutions who still had the benefit of money flowing in from the superannuation levy,” he said. And the benefits have been lucrative for the investment bankers, including UBS, which has led the charge of recapitalisations. “This market has been the leader in terms of recapitalising its corporates,” says Fowler. “Up until about June this year Australia, which normally accounts for about 4 or 5 per cent of capital raised in the world, was about 25 per cent of capital raised in the world. So this market aggressively recapitalised itself.” Superannuation money being put to work to save the market does not surprise the Industry Funds Management chairman, Garry Weaven, regarded as an architect of Australia's superannuation industry. But he does question whether some companies should have been saved: "It's an irony that some people who engineered the debt-funding in their balance sheets tend to be highly paid and overpaid."

And not all were saved. Caliburn's Hunt notes: “It was a shock absorber for companies that institutions regarded as worth saving.” Investment bankers spoken to for this article do not take a backward step about the structure of the capital raisings or their impact on retail shareholders. Commentators have pointed out many of the structures during the recapitalisations seriously disadvantaged retail shareholders. Capital raisings, including the $2.35 billion collected by Asciano in June, have been criticised for being a transfer of wealth from retail shareholders to institutional investors. The criticisms arise because many of the raisings were not offered to all shareholders equally, but were quarantined to large institutional shareholders at a large discount. In the case of Asciano, shares were offered at $1.10, or 40 per cent below the previous market price of $1.83.

For bankers, dealing with only large shareholders has the benefit of speed – a rights offer in Europe or the US can take six to eight weeks. The “accelerated” nature of the placements also allows companies to sidestep an Australian Stock Exchange rule that issuing more than 15 per cent of existing shares in a 12-month period requires shareholder approval. Because shares in accelerated placements are fully underwritten, they are able to be counted as existing shares, which effectively raises the 15 per cent cap necessary for shareholder approval. Critics argue this has allowed not only dilution – when more shares are made available at the same price – but actual value transfer because the shares have been offered at a discount. The structuring of some of the equity raisings and how this was used to benefit big shareholders also came in for attention. UBS rejects as "unequivocally incorrect" and "malicious" suggestions its winning of the mandate to handle Asciano's capital raising was linked to its deal to provide a loan to the debt-laden port operator's managing director, Mark Rowsthorn.

Rowsthorn entered an arrangement with UBS in which he sold 40 million shares at $1.25 each and then took out a "collar" loan over his remaining 36.2 million securities. The deal allowed Rowsthorn to buy his full allotment of 76.2 million securities under the group's one-for-one entitlement offer priced at the lower price of $1.10 a security. As the market has become saner, there are steps back to more equal treatment of all shareholders, most notably in a recent $375 million raising by CSR. Investment bankers argue the structures suited the urgency of the times. “We found that especially when the markets were very dislocated and very volatile, being able to go to market and saying this deal is going to happen, it is going to happen at this price, it is done, is pretty valuable,” says Fowler. “You know, a bit of leadership in terms of pricing. There are other examples in other firms where you put a company into a trading halt for five days while people ran around to try to find a price. We never had a situation like that.”

A case example was a lengthy five-month market suspension for Transpacific Industries as it sought a complex recapitalisation. Hunt says the practical implications of the volatility meant speed became an important factor. “The fact that you could do an institutional sell-down in a day as opposed to going through the lengthy normal rights offering was very important,” he says. “If you think about what happened, banks pulled back. Even when they weren't pulling back they weren't giving companies confidence they would refinance them. That ability to tap the equity market was extraordinarily important.” Skelton provides a practical example, the $750 million recapitalisation of the mining services company Boart Longyear. “They were looking towards a refinancing, which was six to eight months away," he says. “The banks were very nervous. We worked with the company . . . we helped negotiate with the banks to keep them comfortable while we sorted out an equity solution.

“We were able to raise equity for Boart Longyear in a very difficult market . . . and pay down all the debt. “It's a classic situation of going from a near-death experience to being a well-capitalised company that is now set up to grow and run its business appropriately.” The country's top bankers say the superannuation money has not only stabilised the market through recapitalisations this year, the continued flow will be central to their operations for the coming year. Bankers point to Bureau of Statistics figures for superannuation fund asset allocations showing cash allocations remaining significantly higher than long-term averages. The figures show cash allocations began to fall in the September quarter and equity allocations rose. Just as the pension fund money was made available by fund managers to recapitalise the Australian sharemarket, there is optimism cash allocations naturally switching back to equities will provide even further liquidity.

Bankers see this as a precursor to giving companies confidence to engage in merger and acquisition activity. Indeed, the East Coles survey showed 56 per cent of respondents said they would or would possibly raise capital again next year. "What we're seeing is that there's still a significant amount of cash that is on the sidelines which would naturally be in the equities market," says Amelia Hill, an executive director who works on UBS's equity capital markets team. Bankers will use the liquidity flow to encourage corporates to consider opportunities for acquisitions and to persuade privately held companies to consider an IPO. Tony O'Sullivan, from Palladio Partners, says: "I think we're definitely moving from a market where most of the new equity investment has been around balance sheet repair, to one where further equity issues will be around m&a [mergers and acquisitions]."

The head of investment banking at RBS, Nick Rowe, the top-ranked banker in the East Coles survey, says infrastructure and power privatisations from the NSW and Queensland Governments will likely attract pension fund money. "They are quite large pools of assets and they are very much into the long-dated pension fund liability side of things whether it be generation assets, or toll roads or ports that people actually quite like," he says. Hill says the market for IPOs will be tough given most opportunities for next year involve private equity exits. "The most recent experience is institutional investor scepticism as to those opportunities." But Skelton takes a differing view, highlighting 20 potential IPOs identified by Merrills and anywhere between $7 billion and $15 billion in NSW and Queensland government assets possibly coming to market. Companies widely touted to list next year include Rebel Sport (being lead managed by Merrills); Ascendia Retail; the local arm of Bilfinger Berger and logistics business Loscam.

After a year in which business lives and reputations were firmly on the line, the symbiotic relationship between banks and corporates survived and blossomed. The fact the risk-taking of banks in general and investment banks in particular helped get us into this fix in the first place received only muted airplay in the East Coles survey. Respondents were asked if banks that helped during the financial crisis would be rewarded with a stronger and more enduring relationships. One replied: "Are you kidding? Which ones of the Big Four assisted during the GFC? I must have missed that part." But by far the greatest sentiment was on the lines of: "Yes, absolutely. Those that didn't support their customers will pay a hefty price when financial markets return to 'normal'." Fowler reflects on the reality of the situation bankers and corporates faced.

“This last year we have found ourselves working with management or boards who for circumstances sometimes out of their control have found themselves in very stressful situations. So a company has breached its covenants, its share price has fallen rapidly and that's stressful, and you have been given the challenge to find the solution," he says. “That said, when you get to the other end and the clients are happy – that's pretty rewarding for everyone.”