http://business.smh.com.au/business/babcock-to-settle-bank-deal-2...

http://business.smh.com.au/business/babcock-to-settle-bank-deal-20081203-6qql.html

Babcock to settle bank deal

Danny John
December 4, 2008

TROUBLED asset management group Babcock & Brown will effectively operate in wind-down mode as a direct result of a new funding deal agreed with its banks and due to be unveiled today.

The arrangement will give the Australian lenders a big say in the group's future and the banking syndicate's corporate restructuring advisers, McGrathNicol, will oversee B&B's new business plan.

The main members of the syndicate, thought to include the Commonwealth Bank and Westpac, are set to advance new short-term funding to tide B&B over the next few months, so as to enable the group to complete planned asset sales and meet its financial commitments.

About $150 million is said to be involved, which will include an additional main loan and the interest that B&B will have to pay back on the new funding.

In return, the banks will have greater control over the drastic slimming down of B&B's operations, including its proposals to axe 850 jobs, sell off its once core business of aviation leasing and speed up the repayment of at least half of its debt before 2011.

Agreement on the deal was reached yesterday after nearly a fortnight of talks that threw up resistance from at least two European banks and threatened to push B&B into administration.

B&B was last night awaiting the completion of paperwork before a planned investor update this morning. Its shares are set to come out of suspension at the same time. They were frozen at 25c in a trading halt on November 20 that was extended twice so it could sort out its lending arrangements.

B&B has $3.1 billion of corporate debt. Three-quarters is owed to international banks that are facing financial pressures to recoup lending and shut down new advances because of the impact of the global credit crisis.

The Australian banks have been reluctant for B&B to follow the same receivership path of Allco Finance Group and ABC Learning Centres, given the complexities of the group's finances and its links with a host of listed and unlisted funds.