bank plan may ease b&b plight

Bank plan may ease B&B plight

Danny John

November 29, 2008

BABCOCK & BROWN'S international banking syndicate is mulling over a framework deal which will give the troubled asset management group breathing space for a few more months so it can seal the impending sale of some of its assets.

The plan, which will require the backing of all members of the 25-strong lending group, could be approved over the weekend but only if the banks are satisfied B&B can deliver at a much quicker rate on its latest proposals to slim down its operations.

The terms are also likely to include greater involvement of the bank's corporate restructuring advisers, McGrathNicol, who have been touted as B&B's receivers if the group fails to satisfy the syndicate about its ability to repay its $3.1 billion of loans.

It is understood that McGrath's role would be similar to that played by the insolvency specialists Ferrier Hodgson at Allco Finance Group earlier this year.

Ferrier Hodgson oversaw a restructuring plan on behalf of the company's bankers as Allco sought to avoid collapse through a program of asset sales.

Allco's blueprint was subsequently undermined by the crisis which hit financial markets in October which forced the debt-laden entity to call in administrators.

This option still faces B&B, which is struggling to sell its real estate and aviation leasing businesses. But it has yet to be pushed to the brink of breaching its banking covenants that could force it into administration.

Week-long talks between B&B and its bankers extended into yet another early morning finish yesterday, but this time produced signs that B&B could avoid the more immediate fate of Allco.

Sources suggested yesterday a subsidiary group of the lending syndicate, including some of the big Australian banks, would extend as much as $200 million to help tide B&B over to the New Year. It is believed the company is close to completing some disposals which would bring in much-needed cash. This would be used to repay the short-term loan and then make a start on its larger corporate lending facility.

B&B is hoping to get the necessary approval from the syndicate by Sunday night so it can make an announcement to the ASX on Monday morning and lift the nine-day long trading suspension of its shares.

Meanwhile, Babcock & Brown Capital, one of its satellite funds, plans to return $101 million to shareholders rather than reactivate a share buyback.

"The strong feedback that we have received from shareholders has indicated a preference for liquidity, specifically that a cash return would be more favourably received than a continuation of the buyback," the chairman, Kerry Roxburgh, told shareholders at B&B Capital's annual general meeting yesterday. The cash return would be made at 60c per share.

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