lifeline

Bankers throw lifeline to B&B
the age

Eric Johnston
December 1, 2008
BABCOCK & Brown is expected to extend its share suspension this morning as it hammers out final details of fresh funding agreement with its banks, in a deal that will throw the beleaguered infrastructure funds group a lifeline.

The majority of Babcock's 25-strong banking syndicate, including each of the big four Australian banks, yesterday indicated they were prepared to support the revised proposal under which up to $200 million will be injected into the group, giving it time to push ahead with its planned asset sales.

However, Babcock is yet to receive final support for the plan from several smaller European-based banks that require their head offices to sign-off on any new agreement.

People with knowledge of the talks yesterday cautioned that while an agreement looked likely, a final deal — which includes an allowance for penalty interest on the new loan — had yet to be signed.

Babcock will update the market as early as tomorrow on the revised deal, but with many banks based offshore, it could take until Wednesday to receive final approval.

As part of the funding arrangement, Babcock will reduce the amount of banks it directly deals with, with the Australian banks that are tipping in most of the new funds likely to steer any future negotiations.

It has also agreed to the greater involvement of McGrathNicol, which has been touted as B&B's receiver if the group fails to satisfy the syndicate about its ability to repay its $3.1 billion of loans.

The funding is aimed at giving Babcock enough breathing room to stabilise and complete several asset sales that it has under way. At the same time, Babcock is looking at offloading its aircraft leasing and real estate operations, once regarded as central to its portfolio of businesses.

Any agreement would follow a week of exhaustive talks, allowing Babcock to avoid voluntary administration, but it still faces a battle to stabilise as it attempts to pay down its debt.

Babcock's shares, which were placed in suspension for the duration of the talks, last traded at just 25¢.