By Angela Macdonald-SmithJan. 27 (Bloomberg) -- Babcock & Brown...

By Angela Macdonald-Smith

Jan. 27 (Bloomberg) -- Babcock & Brown Ltd. is asking creditor banks to swap most of their debt into a type of equity as it seeks to remain in business while selling assets, the Australian Financial Review said, citing people it didn’t name.

The plan requires the 25 lenders to agree to convert A$2 billion ($1.3 billion) of Babcock & Brown’s A$3.5 billion of debt into perpetual notes, the newspaper reported. The notes would rank ahead of the asset manager’s ordinary equity and A$600 million of subordinate debt, it said.

The banks have accepted there is little chance the loans will be repaid in full and hope the restructuring plan will offer an opportunity to recoup a reasonable return over the next three to four years, the Review said, citing a banker it didn’t identify.