Continuing the FAQ - with some corrections.All statements in...

Continuing the FAQ - with some corrections.

All statements in this FAQ are provisional - they need to be confirmed by appropriate legal experts. If you are a BBSN holder - you need to get legal advice - NOW! This FAQ only attempts to help you understand the basic structures - it is not a substitute for formal legal advice.

Feel free to copy this to your legal council.

1) What are BNBGs?

BNBGs are unsecured, subordinated, cumulative, resettable notes issued by Babcock and Brown. They are also known as BBSN1 (Babcock and Brown Subordinated Notes - AUD$ ver) and BBSN2 (Babcock and Brown Subordinated Notes - NZ$ ver). The are collectively referred to as BBSN.

The proceeds of this debt were lent, by BNB, to BBIPL as a loan. BBIPL have the obligation to service the interest and repay the capital. They do this by paying BNB, who in turn, pay the BNBG holders.

BBIPL also guarantees the interest and loan repayment in the event that BNB is wound up - this is the BBIPL guarantee.

We have a trust deed and a Trustee protecting our relationship with BNB. There is also another trust deed, which I have not seen, which states BBIPL's obligations as guarantor.

2) What is BNB?

BNB is Babcock and Brown Limited - (ABN 53 108 614 955). A publicly listed band of ratbags.

3) What is BBIPL?

Babcock & Brown International Pty Limited - (ABN 76 108 617 483). The operating entity of the Babcock & Brown group. Formerly held 75% by BNB with significant management shareholding, it is now close to 100% as the rats deserted the ship.

4) What are the Listed Satellites?

BBIPL conducted management and development services on behalf of a wide range of public, private equity partnership and owned entities.

Collectively the large Australian listed vehicles were known as the BNB Satellites. This is due to the tight management contracts BBIPL holds over the management of assets in these vehicles.

These include B&B Infrastructure, B&B Wind, B&B Power. A full lis was published on this thread.

5) What is the Banking Consoritum

A group of 25 bank lenders who hold recourse and non-recourse senior debt across BNB, BBIPL and related companies.

6) What is the BBIPL Guarantee?

BBSN noteholders lent money to BNB.

BNB, in turn agrees to repay the debt. However, to strengthen the surety, BBIPL offered to act as guarantor of the interest and capital.

This is the BBIPL Guarantee.

7) How do the pieces fit together?

There are further relationships between BNB and BBIPL. In fact, BNB loans the BBSN noteholder money to BBIPL. The interest and ultimate repayment of this loan are the basis on which BNB intends to meet it's BBSN obligations.

BBIPL are free, in contract, to negotiate further, senior, loan obligations, directly.

8) What needs to happen for the BBSN holders to enact the BBIPL Guarantee?

BNB needs to be wound up. At this stage it is established how much of the BBSN debt BNB is able to pay. BBIPL is liable to cover the shortfall.

(There may be other options).

However, there are some curly issues with the BBIPL guarantee. It would appear as if ex-BBSN holders, as BBIPL creditors cannot act to put BBIPL into administration.

The Banking Consortium has a 9 year suspended animation planned for BBIPL, accumulating "restructuring fees" at 20% per annum. Being an unsecured creditor behind this rapidly accumulating debt would not appear to be a comfortable position.

9) What happens if BNB is wound up?

The difference between anything BNB can pay and the face amount and accrued interest on the BBSN notes becomes a noteholder debt with BBIPL.

Information, to date, indicates the BBSN noteholder will become an unsecured creditor in BBIPL.

10) What assets does BNB have?

The chief asset is shares in BBIPL - BNB now owns almost 100%.

BNB has lent money to BBIPL - but recent company announcements would seem to indicate that this money will not be recovered.

11) Can ex-BBSN noteholders, as BNB creditors, liquidate BBIPL?

Yes, they can. At any BNB creditors meeting - ex-BBSN noteholders could vote to instruct the receiver to liquidate BBIPL.

12) Would this alter the guarantee?

Yes, it probably would - but getting 10% of nothing is the same as getting 200% of nothing - it is still nothing.

13) How can BBSN noteholders get their money back?

This is where it gets really complicated.

If the BBSN debtholders were able to show collusion between the Banking Consortium and the Management/Directors of BNB and BBIPL then it may be possible to sue for damages. This argument could be based on equity law or the law of contracts.

The relationship between BNB (the Issuer of the BBSN debt) and BBIPL the (guarantor of the debt and interest) is a complicating factor in the relationship. This is, in fact, a good thing, if you are trying to make a case for damages.

The fact that BNB directors seem to have "set off" assets - outside the context of a formal insolvency is another area in which skilled lawyers may be able to posit a number of interesting arguments.

The fact that it is likely that a tsunami of legal cr*p may be heading BNB/BBIPL's way, may cause some practical steps to be taken to mollify BBSN noteholders.

14) Are the interests of BBSN Noteholders and BNB ordinary holders aligned?

No, not anymore. The Larkin deal with the Banking Consortium effectively renders BNB's chief asset - it's holding in BBIPL - valueless.

Before the deal, all stakeholders interests were aligned to refinance the company through a promised debt for equity swap, M&A activity, new funding, or similar. Indeed Larkin is on record stating the leverage did not kill BNB (the payments on loans could be maintained) - it was the Banks refusal to make new loans that killed the company.

After the deal, the only way forward is for BBSN noteholders to establish their debt with BBIPL through the BBIPL guarantee.


Hope this helps with the current situation. This is not a substitute for legal advice. If you hold BBSN notes - you need to see a lawyer, NOW!