creditors meeting

I attended the creditors meeting on Wednesday. I don't get to Sydney very often and it happen to coincide with some other appointments which worked out well.

I was able to drag along a (reluctant) associate on the promise than a) we might learn something b) he might get some much-needed media coverage for himself c) I'd shout lunch afterwards.

Lunch was always going to the draw card.

For the record, Swap & Co. have a very small holding of BNBG, the face value of which would be unlikely to have even paid for the Shangri La ballroom hire and the last-traded value of which barely covered off the pre-meeting coffee bill. In summary, our attendance was purely observational and educational.

Firstly, I want to point out that when you have 8,000 creditors (primarily noteholders) split across two countries, hiring a room in Sydney with 650 seats is always going to be the wrong move.

In the absence of any hard data we could roughly say that 4,000 creditors are in Oz and 4,000 in NZ. Assuming people probably aren't going to want to make an international or interstate trip to Sydney, we can apply the NSW population ratio (33%) to get around 1,300 potential attendees from NSW. Booking a 650 person room assumes that 1/2 of these are going to descend on the Shangri La Hotel for what really was only a procedural meeting.

I counted only 60 people in he room in total and after taking out Deloitte staff, comms nerds and microphone dollies, I reckon there were about 35 creditors present. Goodness-only knows how much the whole shebang cost, but it was way over capacity. I can't believe this is the first time Deloittes have organised a bash like this and I would have thought they knew better.

In my view the two Deloitte administrators, Simon Cathro and David Lombe, did a good job conducting the meeting although based on their experience and disclosed fees one would hope so too. The Blakes lawyer, James Marshall, comes with an impressive CV and I'm pleased we have someone of his calibre on the team. On a personal level, he was certainly a hit with the ladies present.

I think it's important to raise the question of administrator independence because it is clear to me, after giving this some thought, that Deloittes really are conflicted in this whole affair.

If you look over the noteholder correspondence from 18th March, the administrators declare that they have not undertaken any prior engagements for the insolvent. In this case though, "the insolvent" is Babcock and Brown Limited - the listed entity.

They then go on however, to list eight engagements which they have undertaken for B&B subsidiaries - seven for Babcock and Brown Australia Pty Ltd and one (wait for it...) to Babcock and Brown International Pty Ltd (BBIPL), the mob we are going after to pay back the noteholders. In fact, the 'Nature of engagement' for BBIPL was "... to provide advice to a subsidiary company about the insolvency process and options available..." Deloittes then go on to say how this will not affect or influence their ability to comply with statutory and fiduciary duties and so on, a point to which we should all be skeptical.

I know a number of partners in big-four firms and I would say they discharge their duties with the utmost professionalism. However, noteholders SHOULD be concerned that Deloittes have done previous work for the BNB group in which there may now be a conflict. They should also be concerned at the relationships between Deloittes and the members of the BBIPL banking syndicate, the names of whom reads like a client and prospective-client list for the big four consulting firms.

For there to be any hope of Deloittes getting some cash back for noteholders, they are going to have to play hard-ball with the very people who directly or indirectly pay them for services in other areas. I would urge creditors to keep this in mind.

I would also highlight the fact that having 12 members on the creditor committee (6 in Oz and 6 in NZ) is, as the chairman said, unusual. The administrator outlined his reasoning for so many members but he forgot to mention that doing so will also diffuse some of the inevitable criticism towards the trustee and administrator should a good outcome not be forthcoming. It appeared ActionBBSN were represented on the committee although I am unsure how many members identify themselves as being associated with the group. Perhaps someone can let us know.

On a final point, I would suggest some caution about having a Colonial First State representative on the creditor committee. As you are doubtless aware, CFS are part of the CBA group who are part of the banking syndicate to BBIPL and therefore a party that has something to lose from a successful claim by noteholders. The walls between CFS, CBA and the rest of the banking syndicate on this matter are going to be paper-thin given the sums involved. CBA won't be interested in the BBIPL confidential documents which committee members see (they already have these); they are interested in the activities of the administrator and the thinking of other creditor committee members, especially if a settlement is proposed.

I would urge creditor committee members to be aware that this potential conflict exists with CFS and act accordingly, even suggesting CFS resign their member in light of the situation.

With all that said, I wish the administrator, members of the creditor committee and all fellow creditors good luck in this process. I think a revised offer for noteholders is on the cards but whether or not it will be slightly-less-derisory than the first one remains to be seen. I genuinely felt for some of the personal creditors in attendance at the meeting and I hope they get to recover some funds.

At the conclusion of the meeting as I dragged my associate away from the media scrum, we compared notes on what we had learned from the last hour or so.

We agreed firstly that, rather than saying "Babcock and Brown International Proprietary Limited", it's perfectly acceptable to say "b-bipple" or even "bipple" and have people know what you mean. This will certainly save a lot of administrator time and expense in the coming weeks and may help to recoup some of the room hire costs. We also suggested that were anyone ever to write a song about the whole Babcock and Brown demise, the word "bipple" would provide numerous rhyming opportunities in the chorus.

Secondly, we noticed that one of the people who made it to the creditor committee is associated with an entity that would be a surprising creditor to BNB. We therefore deduced that his presence, whilst undoubtedly genuine, is more likely to suggest an interest in the process or the details rather than recovery of funds. We spotted him... did you?

Well, after the long trip home it's good to be back on Swap Island. I doubt I'll be back in Sydney for some time; it's just too damned hot for my liking.