Funding Reprieve Deal For Babcock

The Age

Thursday December 4, 2008

Danny John, Sydney

TROUBLED asset management group Babcock & Brown will effectively operate in wind-down mode as a direct result of a new funding deal agreed with its banks.

The arrangement, to be unveiled today, will give the major Australian lenders a significant say in the group's future and involve the banking syndicate's corporate restructuring adviser, McGrathNicol, overseeing B&B's business plan.

The main members of the syndicate, thought to include Commonwealth Bank and Westpac, are set to advance new short-term funding to tide B&B over the next few months, to enable the group to complete asset sales and meet its continuing financial commitments.

About $150 million is said to be involved, including an additional main loan and the interest that B&B will have to pay back on the new funding.

In return, the banks will have greater control over the drastic slimming of B&B's operations, including its proposals to cut another 850 jobs, sell off its once-core business of aviation leasing and speed up the repayment of at least half its debt before 2011.

Agreement on the proposed deal was reached yesterday after nearly a fortnight of talks that threw up resistance from at least two European banks and threatened to push B&B into administration.

B&B was last night awaiting completion of the paperwork before a planned report to investors this morning.

Its shares are set to come out of suspension at the same time, having been frozen at 25 in a trading halt on November 20 that was then extended twice to allow it to sort out its lending arrangements.

B&B has $3.1 billion of corporate debt, three-quarters of which is owed to international banks that are facing their own financial pressures to recoup existing lending and shut down new advances because of the impact of the global credit crisis.

© 2008 The Age

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