australian banks propose plan to save b & b

Australian banks propose plan to save Babcock and Brown

Scott Murdoch | November 29, 2008

Article from: The Australian

THE Australian banks in the Babcock & Brown syndicate have put forward a plan to inject emergency cash into the failing investment group.

Any deal, however, hinges on the decision of the foreign financiers.

It is understood that the $100 million lifeline could keep Babcock alive only for the next one or two months.

However, the funding is contingent on Babcock agreeing to open its accounts to forensic examination by McGrath Nicol.

The administration firm has been appointed by the banks to advise on the negotiations with Babcock's senior management that have taken place to set new debt covenants.

It is understood that the Australian banks formulated the proposal for funding and presented it to the international banks. The Australian banks are exposed by up to $800 million, but the foreign banks will also have to consider the new offer.

It is thought the funding is worth between $100 million and $150 million.

Another meeting between the banks and the Babcock bosses is expected to take place tomorrow, after the Australian banks' offer was presented to the syndicate on Thursday night.

The domestic banks are keen to assess where the value rests within the Babcock parent company, rather than rush to liquidate.

It is understood Westpac is leading the negotiations with the Australian banks because it holds the most exposure, with $240 million in secured and unsecured lending.

The meeting on Sunday night is expected to be the final pitch, given shares in Babcock are due to resume trading on Monday after a trading suspension.

The development from the domestic banks is seen as important, as, sources said, bankers were ready to push Babcock into administration on Thursday morning.

The future of the Babcock satellite funds is now under question, as Moody's downgraded the credit rating of BNB Infrastructure due to its an uncertain outlook.

Ian Chan Chong, a senior Moody's analyst, said the fund had $100 million of corporate debt, plus another $157 million through additional rail holdings.

The fund has cash requirements for the next three months.

"The ratings downgrade reflects the strained liquidity position of BNB Infrastructure and Moody's concern is that asset sale plans may not be completed in time to alleviate the high liquidity challenges facing it," Mr Chong said.

http://www.theaustralian.news.com.au/business/story/0,28124,24722487-20501,00.html