babcock to clear air on its future

Babcock to clear air on its future
David McIntyre
December 3, 2008 - 3:59PM
The future of troubled investment firm Babcock & Brown Ltd (B&B) may be known before the Australian share market opens on Thursday, pending the outcome of talks with its banks over whether to lend it an additional $200 million.

B&B has been in talks to extend loan repayments and borrow additional money with the 25 banks, which had lent the Sydney-based firm $2.8 billion.

The firm had said on Monday that it expected to make an announcement on Wednesday and its shares have been suspended from trading since November 20.

But B&B is now expected to announce on Thursday that its banking syndicate has agreed to lend an additional $200 million, according to a report on Wednesday on The Australian newspaper's website.

The new deal will require B&B to sell certain assets, including its European wind assets, and the banks will get corporate administrator McGrath Nicol to conduct more due diligence and ensure the investment firm follows through with commitments, according to the article.

There was speculation earlier in the week that the German unit of UniCredit Group, HypoVereinsbank (HVB), was not ready to commit to a capital injection to the investment firm.

The Australian said two German banks had come around to lending the additional money.

B&B is trying to arrange the facility to cover a "material" disputed deposit, which has been withheld by one of its banks, believed to be HVB.

According to market speculation, HVB had frozen as much $140 million worth of deposits held on behalf of B&B against B&B's debt owing to HVB.

B&B has refused to confirm the identity of the institution that has frozen the deposit.

But sources with knowledge of the discussions said the 25-member banking syndicate was dominated by European banks, with local involvement confined to Australia's four major banks whose aggregate exposure is estimated to be around $800 million.

Two US banks and two Asian-based banks are also involved, they said.

Trading in B&B shares has been suspended since November 20, when news of the dispute first emerged.

B&B shares last traded at 25 cents on November 19.