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Babcock and Brown calls in administrators -

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Babcock and Brown calls in administrators

The World Today - Friday, 13 March , 2009 12:34:00

Reporter: Peter Ryan

TANYA NOLAN: The embattled financial group Babcock and Brown is on the brink of collapse after
being forced into voluntary administration.

The decision comes after a group of investors in New Zealand rejected a restructuring plan for the
debt laden investment house.

Babcock and Brown has been on life support for months and the company's shares have been suspended
from trade since January.

I'm joined in the studio now by our business editor Peter Ryan.

Well as mention BBI has been in dire financial straits for some time. What precipitated this
morning's decision to call in the administrators?

PETER RYAN: Well Tanya, Babcock and Brown had flagged to the market that if New Zealand creditors
voted against restructuring they would have to call in the voluntary administrators and that's
exactly what happened this morning. Those investors simply rejected the proposal as unfair, saying
it favoured the firm's bankers rather than ordinary investors.

So with around $3-billion dollars in debt and banks anxious to be repaid, Babcock and Brown this
morning appointed the insolvency group Deloitte and the challenge for Deloitte will be to
investigate Babcock's affairs and to see what can be turned around for investors.

A short time ago I spoke to one of the administrators David Lombe who says it's too early to
determine if Babcock and Brown can avoid a complete collapse.

DAVID LOMBE: We've been appointed over the holding company which is Babcock and Brown Limited and
it's our role, we act for the creditors of the company so we will be investigating the company's
affairs to determine what the assets of the company are and what recoveries we can make.

PETER RYAN: What will be your first steps once you get your hands on the company's books?

DAVID LOMBE: Some of our first steps is of course to speak to some of the key stakeholders and that
is clearly in this matter, the note holders. So we are very interested in hearing from them and
talking to them and it will be part of the process for the first meeting of creditors where we will
be seeking to form a committee of creditors which will include quite substantially the note
holders.

PETER RYAN: Are you able to give any indication at the moment of any return in the dollar for
investors?

DAVID LOMBE: No. As I indicated to you it is very preliminary at this point and we can't really
make any comments on those sorts of matters.

PETER RYAN: Babcock and Brown does have some major infrastructure assets but given the tough
financial conditions and falling asset values around the world, is now the time to be selling
anything?

DAVID LOMBE: Look, those matters are being dealt with by other parties and I think it's really a
matter for them to form views as to what is the best outcome that can be achieved there so I can't
really comment on that.

PETER RYAN: And when do you think you will have something to take to investors?

DAVID LOMBE: This process is not straightforward. It's a complex matter. We have statutory meetings
which we have to call which is the first meeting of creditors which is to be held within eight
business days so that will be on the, if I recall it correctly, the 25th.

And then subsequent to that, we will have a second meeting of creditors where we will give a full
report to creditors in relation to the company's affairs and what we recommend.

TANYA NOLAN: Administrator David Lombe of Deloitte.

So Peter what does the immediate future hold for Babcock and Brown?

PETER RYAN: Well Tanya, Babcock and Brown will now stop trading. It will be delisted from stock
exchange. The company admits though the proceeds will go to the banks and it believes shareholders
won't get anything back.

By the way Babcock and Brown shares have fallen 96 per cent over the past year. Back in 2007 they
were worth nearly $34 a share. The last trade - 33 cents.

TANYA NOLAN: And briefly on a separate matter, the administrator of the Allco Finance Group has
urged the corporate regulator to widen its investigation into the collapsed investment group.

PETER RYAN: That's right. Allco called in the administrators in November. It's another company
being kept alive by bankers.

But in a report to creditors, the administrator McGrathNicol says more than a billion dollars'
worth of transactions need closer scrutiny and that includes a deal where the founders, David Coe
and Gordon Fell, were paid around $50-million as part of a takeover of a related company, Rubicon.

McGrathNicol says the corporate regulator ASIC is investigating the, quote, 'potential
miscategorisation of current liabilities'.

McGrath is now recommending that Allco be put into liquidation and there will be a meeting of
creditors on that matter next week.

TANYA NOLAN: Business editor Peter Ryan. Thank you.