bankers consider breather deal for bnb

Bankers consider breather deal for Babcock & Brown

Danny John

November 29, 2008

BABCOCK & Brown's international banking syndicate is mulling over a framework deal that will give the troubled asset management group the breathing space of a few more months so it can seal the impending sale of some of its key 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 that B&B can deliver much more quickly on its latest proposals to radically slim down operations.

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

It is understood McGrath's role would be similar to that played by insolvency specialist Ferrier Hodgson at Allco Finance Group earlier this year, when it oversaw Allco's restructuring plan on behalf of the company's bankers as it too sought to avoid collapse through a program of asset sales.

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

Such an option still faces B&B, which is also struggling to sell its real estate and aviation leasing businesses — albeit that 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 to 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 — which would include interest on a smaller capital sum — to tide over B&B to the new year.

It is believed that the company is close to completing some disposals, which would bring in much-needed cash that would be used to pay back 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 tomorrow night so that it can make an announcement to the ASX on Monday morning and lift the nine-day-long suspension of trading in its shares.

It promised to update investors about the talks with its bankers as soon as possible after December 1, when trading was halted with its stock at 25 cents.

http://business.theage.com.au/business/bankers-consider-breather-deal-for-babcock--brown-20081128-6n22.html