b&b survival rests in bank crisis talks

B&B survival rests in bank crisis talks

Danny John
January 9, 2009

TALKS between Babcock & Brown and its bankers will continue into the weekend as the beleaguered investment group tries to avoid a collapse into administration.

B&B's future now rests in the hands of its lenders after its disclosure on Wednesday in a statement after the market had closed that it would take a massive write-down against its $2.6 billion of assets, most of which are now for sale as it seeks to pay $3 billion of debt.

With the group facing technical insolvency because of the overwhelming impairment charges it will take in its December 31 accounts, B&B needs a new agreement with its 25-strong banking syndicate to ensure its survival beyond the next few weeks.

Its uncertain future caused volatility in its shares on the ASX this week and that prompted B&B to put its stock into suspension at 32.5 cents yesterday, as the negotiations reached a critical stage.

The group told the exchange just before the market opened that trading in its shares should be halted because it was expecting a "partial response" from its bankers during the day but that a complete response - enabling it to make a formal announcement to investors - was unlikely before Monday.

The banking syndicate - which is made up of domestic and international lenders - met on Wednesday night to discuss the rescue proposals and held a further session last night.

Further discussions are due to take place tonight with a final decision on whether to accept the blueprint or press for additional variations unlikely before Sunday evening.

B&B presented its latest business plan to the syndicate just before Christmas. It envisages a greatly slimmed-down version of the group and a debt-for-equity swap that will result in the banks owning what remains of the operations.

The result will be to leave B&B's existing shareholders - including its senior executives and staff - with only a tiny proportion of the current investments.


http://business.smh.com.au/business/bampb-survival-rests-in-bank-crisis-talks-20090108-7cv3.html