Macquarie Bank shares have bounced by $4.30 to $74.35 in a recovering market this morning and the Macquarie Fortress notes have gained 6c to 64c after this announcement yesterday suggesting that all is not lost.

Despite being geared to the eye-balls, Macquarie Fortress has managed to sell $US287 million of US corporate bonds and only realise a modest $US12 million loss. With all the remaining bonds performing and no more margin calls in the offing, the worst case scenario of $300 million in losses now seems highly unlikely.

However, there are a number of reasons for Macquarie Bank’s overall weakness, foremost of which is the reputational hit suffered through the global coverage of its Fortress hiccup.

An investment bank is only as good as its people, money and reputation. Indeed, an associate editor from Barron’s was on CNBC last night claiming that the likes of Bear Stearns are simply “capitalised reputation”.

If your name is mud, deal flow will dry up and the value proposition is gone. This partly explains why Macquarie Bank is fighting so hard against The Australian with its defamation action over the Beaconsfield Gold coverage.

The other smokey in the pack with the credit market wobbles is the pipeline of unclosed transactions that Macquarie has committed to.

A good example is Macquarie Media, which has contracted to buy the regional television assets of Southern Cross Broadcasting for $820 million. The announcement at the time spelt out the debt raising options, which include $940 million of senior debt secured its Southern Cross and regional radio assets, an 18-month bridging loan of $153 million and the possible refinancing of its $600 million-plus loan supporting the investment in Taiwan Broadband Communications.

All up, Macquarie Media has now committed to buy almost $3 billion worth of media assets, but only raised about $800 million of equity to support this. If debt costs blow out and the Reserve Bank jacks up interest rates again tomorrow, all of this will be a lot more expensive to service.

The gearing is even larger in Macquarie Communications Infrastructure Group given the recent $10 billion splurge on assets in the UK and US and its units hit a 12-month low of $5.71 yesterday but have bounced 16c in morning trade.

Despite being saddled with between $120 billion and $150 billion of debt across its unprecedented empire, some Macquarie vehicles are eminently cashed up. For instance, Macquarie Airports is currently looking at a $1 billion-plus capital return given it has surplus cash of $2.2 billion.

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