response to asx query

ASX Release
12 June 2008

RESPONSE TO ASX QUERY

International investment and specialised fund and asset management group
Babcock & Brown (ASX: BNB) wishes to clarify the operation of the market
capitalisation review clause contained in the Group’s corporate debt facility as
announced to the market on 27 March 2008.
The key elements and effect of the market capitalisation clause are very
different to other market capitalisation events that have occurred in recent times
with other listed entities on the ASX.
In summary the market capitalisation clause in the Group’s corporate debt
facility is not a default or breach of covenant event but rather a review event
based on an absolute market capitalisation level.
The review event applies if the market capitalisation is below $2.5 billion at
close of trading. The review event operates as follows:
• Once the market cap level is reached, the corporate facility lenders have the
option of deciding whether to call for a review.
• Should the banks call for a review, this would entail a four month
consultation period with lenders during which time the company will continue
to operate as normal with no impact on its access to the corporate debt
facility.
• The consultation period is designed to allow discussions, including whether
in fact any action at all is required – as the market capitalisation clause can
cure itself through natural movement of the markets.
• There are no automatic prescriptive requirements such as acceleration of
debt repayments. During a review period, the company would need to seek
the lenders’ permission to pay dividends and subordinated note interest.
• At the end of the four months if the market capitalisation is above $2.5 billion
the review is automatically cured and no further action is required.
• If at the end of the four month review period, the market capitalisation
remains below $2.5 billion, Babcock & Brown would be required to execute
any course of action that has been agreed with the lenders during the four
month review period.
• If at the end of the four month period the market capitalisation remains
below $2.5 billion and there is no agreement between Babcock & Brown and
its lenders as the course of action required, a minimum 2/3rd of the lenders
by participation have the right to serve notice on Babcock & Brown to repay
the corporate facility within 90 days.
Phil Green, Babcock & Brown CEO said, “The market capitalisation review
clause in the group’s corporate debt facility serves as a point where the
companies lenders could choose to review the security of their loans with the
company.
“Reaching the market capitalisation level does not in itself trigger any
requirement to repay the debt or accelerate repayment of the debt.
“Our lenders are more focused on fundamentals than the daily share price
movements. The Group’s fundamentals continue to be in robust shape,
particularly in the infrastructure business. Operating cash flows, interest cover
and liquidity are strong and we remain well within all debt covenants.
“We expect this position to be enhanced during the third quarter of this year
with completion of the European wind asset sale process which is well under
way.
“Further, it should be noted that there are no cross shareholdings or loans
between our listed funds,” Mr Green concluded.
Babcock & Brown acknowledges its continuous disclosure obligations under
ASX Listing Rule 3.1 and confirms it is in compliance with those obligations.
For further information please contact:
Kelly Hibbins
Babcock & Brown
+61 2 92291866
[email protected]
About Babcock & Brown
Babcock & Brown is an international investment and specialised fund and asset
management group with longstanding capabilities in structured finance and the
creation, syndication and management of asset and cash flow-based
investments. Babcock & Brown was founded in 1977 and is listed on the
Australian Securities Exchange.
Babcock & Brown operates from 32 offices across Australia, North America,
Europe, Asia, United Arab Emirates and Africa and has in excess of 1,400
employees worldwide. Babcock & Brown has four operating divisions including
real estate, infrastructure, operating leasing, corporate and structured finance.
The company has established a funds management platform across the
operating divisions that has resulted in the creation of a number of focused
investment vehicles in areas including real estate, renewable energy and
infrastructure.
For further information about Babcock & Brown please see our website:
www.babcockbrown.com