Babcock & Brown devises plan with banks

Investment firm Babcock & Brown Ltd says it has reached an agreement with its
bankers on a restructure of its corporate debt facilities and a revised business
plan that will facilitate the reduction of those facilities.
Under the agreement Babcock & Brown chief executive Michael Larkin and senior
management will sell down assets over two to three years to reduce debt.
Babcock & Brown's existing corporate debt facilities will be restructured, with all
interest payments and about $2.12 billion of principal repayments to be on a "pay if
you can" basis.
Babcock & Brown also reported earnings going forward would be volatile and
significantly affected by the timing of asset sales and the prices achieved for
those sales.
Babcock & Brown reiterated there would be no value for equity holders and no, or
negligible, value for holders of the company's subordinated notes after it has
implemented the revised business plan.
Furthermore, Babcock & Brown would not be in a position to resume paying interest on
the subordinated notes or dividends on its shares.
"Having reached an agreement with the banking syndicate with respect to the
restructure of the corporate debt, the board is now considering the position in
relation to the subordinated notes," Babcock & Brown said.
A delisting event occurs under the notes if Babcock & Brown ordinary shares are
suspended from trading on the Australian Securities Exchange (ASX) for a period of
20 consecutive business days.
The ordinary shares have been in trading halt for two business days and suspended
for a further 18 business days.
Babcock & Brown said it is considering the implications of this and also a possible
restructure of the subordinated notes.
No assurance can be given that a restructuring will be achievable.
"In the absence of the restructuring of the subordinated notes taking place, it is
likely that Babcock & Brown Ltd will be placed in administration within the coming
weeks," the company said.
"If that occurs, it is also likely that the shares of Babcock & Brown Ltd will be
delisted from the ASX."
An administration of Babcock & Brown Ltd would not affect the solvency of Babcock &
Brown International Pty Ltd, the primary operating company in the Babcock & Brown
Group and borrower of the corporate debt.
"It will continue to operate and implement the revised business plan, including the
asset sale program as outlined," Babcock & Brown said.
"Babcock & Brown proposes to seek continued suspension of its shares and
subordinated notes at least until details of the position in relation to the
subordinated notes is able to be announced.
"The board and management deeply regret the loss of shareholder and subordinated
note holder value and acknowledge the financial hardship this has caused investors."
The agreement with Babcock & Brown's bankers provides for a $150 million short-term
facility entered into in December 2008 and two other existing $2.8 billion and
$US200 million corporate facilities to continue.
However the facilities will be restructured and the repayment dates changed.
The company is required to operate under expenditure parameters agreed to by its
bankers and cannot make interest or principal payments in respect of the
subordinated notes while the corporate debt facilities remain outstanding.
Babcock & Brown said that as a consequence of the revised business plan, the company
would recommence a redundancy program started in the second half of 2008.