Addressing racism’s toxicity
Rebellion, chaos and mysticism

UBS – the unnecessary loan

David Kitchnoge - explains the loan should never have been


PORT MORESBY - As the infamous UBS loan inquiry commences here in the national capital, let's take a quick look at how we got here.

The Papua New Guinea government had a 17.6% interest in Oil Search when Oil Search merged with Orogen Minerals in 2002.

When the PNG LNG project crystallised in 2009, and the final investment decision had to be made, the government's legislated funding obligation kicked in.

But the government needed to first repay 19.5% of the sunk cost to exercise its so-called 'back-in-rights' and hence acquire equity in the massive project.

And then, once it was in, the government needed to fund its share of the construction costs.

To be able to meet these huge funding obligations, the government entered into an exchangeable bond arrangement with the Middle-East based IPIC to raise US$1.1 billion.

At this time, PNG effectively sold its 17.6% stake in Oil Search. This point needs to be made clear. This was when we sold our Oil Search shares.

A press release announcing the IPIC bond on the Oil Search website clearly spelled out IPIC’s intention to convert the bond to Oil Search shares upon maturity.

So IPIC had always intended to own the shares in Oil Search once held by PNG government.

The reason the deal was transacted as a bond rather than as an outright sale and purchase of shares was because the value of our Oil Search shares wasn't sufficient to provide the amount we needed (US$1.1 billion) but there was potential for the shares to grow to that amount over time.

The bond was structured to limit the downside risks for the Arabs whilst allowing PNG to pre-sell its shareholding in Oil Search. It was a smart deal. Anyone who says they could have done a better job than Arthur Somare and his team at that time would be lying.

Given the intent of the IPIC exchangeable bond as I’ve explained, there was no need to refinance it upon maturity. The Arabs were always going to grab our Oil Search shares to redeem their bond. That had been their intention from day dot.

And by some stroke of luck or ingenuity, the value of those shares had increased over that time to sufficiently cover the bond principal as originally envisaged in the deal. Stars were aligned and it was a case of tok idai!

On our part, we leveraged a less valuable asset (Oil Search shares) with an uncertain dividend stream to acquire a more lucrative asset (a share in PNG LNG) with an excellent dividend stream.

So we never lost anything. It was a smart move that created real value for PNG. There was no need to keep our Oil Search shares once they were taken by the Arabs under the terms of the IPIC bond.

Given all this, the UBS loan should never have been negotiated in the first place.

Even if PNG had negotiated it in the hope of redeeming the IPIC bond, the loan should simply have been cancelled when it became clear that the Arabs weren't giving up the Oil Search shares. It was that simple.

When Peter O'Neill ran out of excuses for the disastrous UBS loan that was unnecessary, he used the nonsensical argument that the PNG government needed to remain a significant shareholder in Oil Search because it was the largest employer in PNG and needed to be protected from outside interests.

Well guess what? We are no longer a shareholder, the Arabs are now a substantial shareholder, and Oil Search is still going strong.


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Arthur Williams

Yes Keith we know what they say about statistics. I checked several and found

1 2019/06/25
In the 2016 campaign, eventual winner Republican Donald Trump and runner-up Democratic nominee Hilary Clinton spent a combined $1.16 billion' ..that supports my original figure.

2 171127

Hillary Clinton (D) $563,756,928 plus $206,122,160 = $ 769879088
Donald Trump (R $333,127,164 plus $118,217,367 = $ 451344531
Numbers on this page are for the 2016 election cycle and based on Federal Election Commission data released electronically on 11/27/17.
Agrees with me on Clinton's spend but increase Trumps

3 2016 Dec 9th
Hillary Clinton TOTAL RAISED $ 1,191M
Donald Trump TOTAL RAISED $ 646.8M

My initial figures and these 3 all say the Trump and Clinton both cost more than a billion between them. The Bloomberg one goes far higher ONLY?! £162M short of 2 billion. I find Bloomberg normally a good website and they say their source was: 'Federal Election Commission'
It was informative and they provided:
Top donors to Trump campaign and PACs
$66.1M . . . . . . . Donald Trump
20.5M. . . . . . . . Sheldon & Miriam Adelson
7.2M. . . . . . . . . Linda McMahon
7.2M . . . . . . . . Robert Mercer & family
7.0M . . . . . . . . Bernard Marcus

Top Donors to Clinton Campaign and PACs
$22.8M . . . . . . . .S. Donald Sussman
18.0M . . . . J.B. & Mary Kathryn Pritzker
14.7M . . . . . . . Haim & Cheryl Saban
11.9M . . . . . . . Fred Eychaner
11.8M . . . . . . . George Soros

These figures beg the question: 'Why would anyone denote millions to support a candidate?'

Arthur Williams

Yet most of those who raised their hands to approve the UBS loan are still at the trough. Guess you deserve who the majority voted for.

Over my now 50 year connection with PNG I have seen a known rapist, a murderer, several fraudsters, a few liars get elected.

Doesn't reflect well on we citizens but guess they voted because of perceived or promised benefits if they voted for Mr XXXXX.

Why can't they copy the number one democratic nation of the USA in electing totally moral upright members to govern them. After all Obama spent only $734 million, slightly less than Hilary's $768m which was almost twice as much as Trump's £398. So we are told 'Every citizen can become President'..LOL.

In 1895, Mark Hanna, a U.S. senator from Ohio, explained how politics worked in his times: “There are two things that are important in politics,” he said. “The first is money, and I can’t remember what the second one is.”

The verified campaign expenditures were: Obama $775 million, Clinton $565 million and Trump $327 million - KJ

Mathias Kin

ONeill had to sack Polye the Finance Minister when he refused to sign and make himself Finance Minister for 2 days just to approve the UBS loan himself.

You smell a rat! I smell rotting rat! There is reason PO signed off the loan. There is a reason known only to himself.

David Kitchnoge

The Commission of Inquiry must establish the motive for the UBS loan. That is the great unknown at this stage.

What was the real motive for this loan? It couldn't have been to 'protect Oil Search from outside interests'. This lie has now been exposed for what it really was.

What we do know is that Oil Search used the proceeds of the share placement to PNG government, which was bought from the proceds of the UBS loan, to acquire Pac LNG's interest in PRL15 (commonly known as Papua LNG) at an exhorbitant price compared to what Total SA paid for the same asset.

I smell a rat. Follow the money trail.

Ian B Mautu

Explicitely explained here, David. A scam all along and I wasn't one of those fooled. Send all these greedy mobsters to Bomana.

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