Babcock noteholders rally amid confusion over guarantee
Fiona Robertson | Tuesday February 17 2009 - 07:55am
New Zealand investors in Babcock & Brown subordinated notes are well represented in an investor group planning to push for liquidation of the company.
But there is confusion over what rights the noteholders have under a subordinated guarantee from holding company Babcock & Brown International (BBIPL), which is staying afloat due to a lifeline from its bankers.
Investors on both sides of the Tasman have $225 million in NZDX-listed notes and $A415.8 million in Babcock subordinated notes.
They have been told not to expect any returns, as Babcock shareholders’ equity has been wiped out of the company.
But the deal struck with bankers seems to have some note investors riled.
The bankers are due to be repaid $A1.19 billion plus interest by 2011 with a remaining $A2.2 billion plus a 20% annual restructuring fee repayable, if possible, by 2018.
Around $A20 million has been allocated to keep staff onboard to manage the wind down over the next few years, according to the Business Spectator.
Hence the organiser behind the ActionBBSN group argues that liquidation will be no worse for noteholders than if Babcock remains alive under the costly restructure.
The idea is that if noteholders put Babcock & Brown in administration, they could then vote at creditors’ meetings to pull the company’s remaining asset - BBIPL - into liquidation as well.
Babcock & Brown International is the group’s primary operating company and the body responsible for the banking debt restructure.
As a liquidation vote could threaten the banking restructure, the hope is that noteholders will then get an offer to stay onboard.
But Babcock says even if the investors push the listed Babcock & Brown into liquidation, Babcock & Brown International and its banking debt restructure will not be affected.
A company spokesperson says the BBIPL guarantee is subordinated to banking claims, so the noteholders cannot call on it until after bankers have been repaid.
BBIPL can only be pushed into liquidation if it is insolvent, and it isn’t, the spokesperson says.
Nonetheless, the ActionBBSN group organiser says interest in the group is growing rapidly, although there are still not enough members to guarantee passing a liquidation resolution.
Most of the Kiwi investors signed up have smaller holdings of between $50-150,000 notes.
Some Australian investors hold more than $A1 million of the notes.
Babcock & Brown is considering a possible restructure offer for the noteholders after continued trading suspensions on Babcock shares triggered the right for noteholders to call in their investments.
If a restructure is not passed the company is likely to go into administration.
Trustee Company, the trustee for the noteholders, did not want to comment today.
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BNB
babcock & brown limited
