decline in price, page-2

it is due to this article



Why did Tricom get the Green light?
Email Print Normal font Large font AdvertisementIan Verrender
April 3, 2008
Page 1 of 2
IT'S time Phil Green, the pugnacious boss of Australia's second biggest investment bank Babcock & Brown, came clean on why he is propping up troubled stockbroker Tricom Securities.

For months now, ever since Allco Finance hit the skids and took Tricom with it, questions have been raised in the market about whether margin loans had been taken out by senior Babcock executives.

Every time those questions have surfaced, they've been slammed by Green as a malicious attempt by predatory hedge funds to drive Babcock stock lower.

The gossip was based around connections. Green and Tricom's founder Lance Rosenberg are good buddies.

Babcock & Brown and Tricom have been involved in numerous deals together and Tricom helped float the company.

Add to the mixture that Babcock & Brown was an entrepreneurial risktaker with a predilection for debt and Tricom ran a huge margin lending business.

But Green was adamant. In February, he declared senior executives owned stock worth more than $1 billion and there was no more than $50 million in margin loans over that stock. There was no margin loan pressure on senior executives, he said.

If that's the case, why did Babcock & Brown, which has been under enormous pressure itself, reportedly extend a financial lifeline to Tricom after rival broking firm Bell Potter Securities walked away from a deal to buy Tricom for $1?

Tricom once again is in serious trouble. This time it is because of the collapse of the Melbourne broker Opes Prime.

In an attempt to bail itself out of trouble, it seems Tricom handed over about $70 million worth of client stock to Opes Prime in exchange for $30 million.

Think about it. A troubled margin lender was taking a margin loan on stock already covered by margin loans from another troubled margin lender. Imagine what Bud Abbott and Lou Costello could have done with that!

Yesterday, it was revealed that among that $70 million in stock, Babcock & Brown satellite companies comprise a large chunk of the portfolio.

There's Babcock & Brown Wind, Babcock & Brown Capital and Babcock & Brown Power. Is this why Phil Green is so eager to protect his old mate?

Last Friday, just before Opes Prime was forced to close its doors, Tricom attempted to retrieve that portfolio. It failed.

But yesterday Rosenberg claimed Tricom had since bought all the shares from Opes Prime's lenders, ANZ Banking Group and Merrill Lynch.





It's a claim not backed up by the banks and one which, frankly, doesn't make any sense.

The banks have security over that stock.

It seems inconceivable they would do themselves out of $30 million - the difference between the $70 million portfolio and the $40 million margin loan - just to help out Tricom.

The statement raised some serious questions, all of which have gone unanswered.

Where did Tricom get the cash for this transaction?

If the banks are being so generous with Tricom, why don't they extend the same terms to other Opes Prime clients whose shares have been seized?

The only word out of Babcock yesterday was that it was

"continuing to work with the banks to facilitate some sort of stability with Tricom".

According to a spokeswoman, "it is in everybody's interests that the process of bringing about stability in Tricom is done in an orderly fashion."

Why? What's the link between the company and the broker?

It's been an ugly time for financials.

Every major bank around the world has been left battered and bruised as the greatest debt binge in history has begun to unravel.

For those inhabiting the financial frontiers, like Babcock & Brown, it's been absolutely brutal.

For months now, as the global financial system has gone into meltdown, Green has watched in horror as the share price of the Babcock parent group and that of its listed satellites has plunged.

With each new crisis, each new threat, he's gone on the front foot. Each time, it's worked. His emphatic denials that the company was overloaded with short-term debt, that bonuses were not delayed by cash flow problems and that the group was short of capital have been accepted at his word.

The problem is, there's a disconnect between the table-thumping rhetoric, the emphatic denials and the actions that have followed immediately afterwards.

He recently raised $220 million in new equity at a deep discount to Babcock's market price - hardly the actions of a company with adequate capital reserves.

And he's achieved the seemingly impossible; refinanced and pushed out the maturity on $2.8 billion worth of debt

until 2011.

Each time Green has pulled off the impossible and placed his company on a surer footing, he has chipped away at his credibility and undermined his authority - at least in the short term.