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executivesFont Size: Decrease Increase Print Page: Print Michael Sainsbury | January 28, 2009
Article from: The Australian
PHIL Green and Rob Topfer -- the top Babcock & Brown executives who left last year as the investment bank careered towards its current crisis -- stand to pocket more than $3 million in cash after the company's private equity offshoot promised to return $100.7 million to shareholders.

Babcock & Brown Capital said yesterday it would make the capital return out of its $325 million cash reserves despite signalling major write-downs onthe value of its investment portfolio.

B&B Capital directors said yesterday the net asset position it would report for December 31 would be "materially below" the $937million position at June 30.

The fall reflects issues at its 51.7 per cent-owned Irish telecommunications carrier Eircom, in which other Babcock & Brown associates also hold an 8 per cent stake, and its wholly owned Israeli phone directories business, Golden Pages.

"Since year end, we are aware of a number of factors that are impacting the valuations of the investments, including: a deterioration in comparable company valuations; challenging economic conditions and financial markets; and a fall in the market value of the assets held in the principal pension scheme of Eircom," B&B Capital said in a statement.

The company said it had $325 million left from the $1 billion it raised from shareholders during its 2005 initial public offering.

Directors have already indicated they do not plan to make further investments but will in the short term keep more than $200 million of the cash as a contingency to support the existing businesses "given the uncertain economic environment". The $100.7 million will be returned to shareholders, pending approval at a meeting to be held next month, in a payment of about 60c a share.

B&B Capital shares continue to trade at $1.17 a share, in stark comparison to the fortunes of its parent and manager, Babcock & Brown, which has been suspended from trading since earlier this month as it seeks to strike a lifesaving deal with its banks.

On Friday, Babcock & Brown said its deal to renegotiate $3.5 billion worth of debt -- possibly though a debt-for-equity swap -- would leave nothing for shareholders who just 18 months ago had a stake in a company worth $1billion.

Mr Green, the chief executive of Babcock & Brown and a director of B&B Capital, and Mr Topfer, a long-serving Babcock & Brown executive and B&B Capital director, stepped down from their positions at both companies last year. But shareholder notices reveal that both stand to make significant amounts from the B&B Capital cash return if they have not recently sold their shares.

Mr Green held 1.6 million B&B Capital shares in September last year, putting him in line for a $960,000 payment. Mr Topfer held 3.73 million shares, meaning he could collect up to $2.2 million.

Former B&B Capital deputy chairman Bill Wavish, the chairman of the Myer department store chain, held 25,000 shares at the time of his last director's notice in April last year, as well as 1million out-of-the-money options. B&B Capital shares peaked at $5.60 in July 2007 before starting a steady decline, closing at $1.17 yesterday -- a $750 million fall in market value.

"As large shareholders, they, along with other shareholders would also have lost money in their B&B Capital investment," Babcock spokeswoman Erica Borgelt said of Mr Green and Mr Topfer. "The capital return was in response to requests from the B&B Capital institutional shareholders with no regard to Rob and/or Phil's position."

B&B Capital also confirmed yesterday it would push forward with other changes, including severing ties with Babcock & Brown by taking its management in house and changing its name.

In November, it outlined a deal worth as much as $50 million to Babcock & Brown to cut the cord with its parent but the timing of the deal has been made uncertain by the hefty write-down looming