[url=http://www.theaustralian.news.com.au/business/story/0,28124,24666475-20501,00.html]Babcock venture faces loss in Wachovia deal
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Katherine Jimenez | November 18, 2008
Article from: The Australian
EMBATTLED Babcock & Brown yesterday warned that its property joint venture with General Property Trust faced a potential loss of about $US82 million ($128 million) on a debt facility with US bank Wachovia, renewing concerns about the future of the investment house.
The warning came as Wachovia -- which is also part of a banking syndicate keeping troubled shopping centre owner Centro Properties Group alive -- issued a "notice of acceleration", after the joint venture declined to provide additional collateral requested by the bank.
The loan specifically relates to a $US112 million facility linked to a special purpose vehicle, HTM Fund 1 Subsidiary A LLC, which holds US real estate assets on behalf of Babcock and GPT. The fund is one of the portfolios that sit within the $6.5 billion global property joint venture.
In a statement yesterday, Babcock said discussions between the parties were ongoing, but "if these talks are not resolved satisfactorily the Babcock & Brown-GPT joint venture may suffer loss upon the liquidation of these loan assets by Wachovia Bank".
Babcock's maximum exposure to any potential loss would be "equivalent to 50 per cent of the joint venture's exposure or approximately $US41 million", it warned.
It is understood HTM declined to put more equity into the portfolio, because of the potential for further falling asset prices. It is unclear how much additional collateral the bank had asked.
Spooked investors sent Babcock's share price skidding 14.58 per cent or 7c to a record low of 41c.
Not even earlier, separate, positive statement from Babcock & Brown Wind Partners about the $2.2billion sale of a portfolio jointly owned wind farms in Portugal was able to calm investors.
Concern has been building about the future of Babcock since rival Allco Finance Group was placed in receivership earlier this month.
"Babcock's already gone. It's in liquidation mode," Platypus Asset Management chief investment officer Donald Williams told Bloomberg.
"It's at the same point that Allco was six months ago, with its bankers keeping it going for as long as they can get some of their debt back."
GPT's units sank 8.9 per cent or 10c to $1.02, on heavy turnover.
A source close to Babcock confirmed the joint venture with GPT remained strong and stressed that the only recourse was to the assets within the HTM Fund 1 Subsidiary A LLC portfolio.
"This is no-recourse to anything else in the joint venture", the source said.
A spokeswoman for property group said "GPT expects it (the joint venture) to unwind from the end of 2009" based on the joint venture "not reaching its performance hurdles".
The book value of Babcock's net equity investment in the joint venture with GPT stood at $169million as of June 30.
BNB
babcock & brown limited
