b&b still battling to resolve crisis, page-3

Babcock urges banks to throw it a $100m lifeline

Scott Murdoch

November 28, 2008

Article from: The Australian

BABCOCK & Brown last night mounted a last-ditch bid to convince its banking syndicate to approve a short-term $100 million funding lifeline.

The cash is being sought to make up for a deposit of up to $150 million that is being held back by German bank HypoVereinsbank to cover its loan to Babcock.

The management of the troubled investment group, chief executive Michael Larkin and chairwoman Elizabeth Nosworthy, were locked in further negotiations last night.

A meeting on Wednesday is believed to have lasted nearly 12 hours, with bankers not leaving Babcock's Sydney headquarters until 1.30am.

If a deal cannot be reached today, Babcock could be placed into administration. "It is looking very, very grim," one source said last night.

It is thought that some members of the 25-banking syndicate are keen to extend a fresh $100 million to Babcock, which could allow it to survive into early next year.

However, a deal is being blocked by some banks that are worried about their positions.

Australian retail banks, which have an exposure of up to $800 million, have taken a mixed approach, with some willing to lend again to Babcock.

Some of the international banks may be prepared to lend to the group.

It is understood that the loan does not need to be approved by all of the 25 in the financing syndicate.

There are concerns over repayment priorities if the new loan does go ahead.

Some banks are concerned they would fall further down the "payout queue" if other banks were to extend the funding.

Shares in Babcock are suspended until Monday, but bankers expect a decision on the beleaguered group's future to be delivered today.

Separately, analysts have also begun to question the sustainability of a satellite fund, Babcock & Brown Power.

The fund is already examining the prospects of a trade sale, or spinning off some its existing assets, to shore up its capital base.

Deutsche Bank analyst John Hirjee said the solvency of the fund was a concern