(17 March 2009 – Australia) What was formerly Australia’s second biggest investment bank, Babcock & Brown, has called in the administrators, ending a crisis at the bank that has developed over the past year.The Directors of Babcock & Brown Limited announced that investors in the company’s subordinated notes listed in New Zealand have voted against a proposal to restructure the terms of the notes. Note holders in Australia will not even have a chance to vote on the proposal.
The vote forced the company’s board to appoint David Lombe and Simon Cathro of Deloitte Touche Tohmatsu as voluntary administrators.
A majority 58.14 percent of New Zealand investors holding $600 million of Babcock unsecured subordinated notes voted against a debt restructure plan which includes the acceptance of just 0.1c in each $1 invested.
The rejection meant Babcock would be insolvent as it will not be able meet a $15 million interest repayment now due.
The Australian banks hold at least $725 million of exposure to Babcock, with Westpac having the most through a $300 million secured and unsecured loan.
Through its subsidiary B&B International, Babcock owes its 25 member banking syndicate more than $3.1 billion.
The subsidiary owns and operates all of the business assets of the group and the banking syndicate has a priority claim to those assets.
The syndicate is currently overseeing a sell off of B&B International’s assets, which is expected to be completed within three years.
The satellite funds, particularly Babcock & Brown Infrastructure and the separate Power entity, have distanced themselves from the parent company’s collapse, and said that they are unaffected.