Finance and property giant on the brink of collapse

Investment giant Babcock & Brown appears close to collapse after one of the group’s key bankers refused to inject emergency capital into the group.

Investment giant Babcock & Brown appears close to collapse after one of the group’s key bankers refused to inject emergency capital into the group.

Babcock & Brown placed its shares in a trading halt as Germany’s HypoVereinsbank is trying to stop the stricken group from accessing a large deposit. The move is believed to have angered many members of the syndicate of 25 banks that are exposed to Babcock.

The syndicate was attempting to get a deal that would allow Babcock to extend its debt covenants in return for promises to sell half of its assets, including its international real estate and aircraft leasing business.

If a deal cannot be reached, the company is likely to be placed in receivership, although this is not the preferred option of many of Babcock’s lenders – they would rather a more managed sell-off, which will give them a chance to get their loans paid off.

At its peak, Babcock & Brown was a $10.3 billion giant, with operations sprawling across investment banking, property, infrastructure and financial services. Today the company is worth just $75 million.

Babcock is also a major shareholder and manager of a series of listed investment funds, including B&B Infrastructure, B&B Power, B&B Wind, B&B Communities Group (an aged care business) and B&B Residential Land.

Earlier this week, Babcock chief executive Mike Larkin unveiled a plan to slash 850 jobs, sell assets and turn the company and focus the company on infrastructure.

But unless the company can win over its little-known German bank, the plan – and perhaps the entire company – could fail.

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