View Full Version : Babcock & Brown Notes (BNB010)

07-03-2010, 09:08 AM
These subordinated notes have residual value based on the liquidation process being conducted by Deloitte (BBL).

They are not directly tradeable - however there may be interest in discussing prospects for recovery. I understand that there is a reasonably significant holder base in New Zealand (based on the funding of the Powerco takeover).

Any interest in a discussion?

06-04-2010, 09:35 AM
Hi Enumerate

I hadn't seen your post here...would have replied earlier.

This seems to have gone very quiet since the $400 contributions to "further investigations" last year.
Have Deloittes made any progress on that?

08-04-2010, 08:36 AM
This seems to have gone very quiet since the $400 contributions to "further investigations" last year.
Have Deloittes made any progress on that?

My friend would also like to know. (For those new to this discussion, there is another comprehensive thread on the NZX section.)

08-04-2010, 03:09 PM
The AUD$400 was a contribution to fund the investigation phase for further legal action.

My understanding is that a total of AUD$400k was raised which was deem sufficient, by the Deloitte liquidator, to pursue both Australian and American lines of investigation. It should be noted that one individual contributed AUD$100k to the legal fund.

The key investigative step, in Australia, was to be the "public investigation". This was to be held late last year but was postponed until this year due to illness of key Babcock people and the enormous volume of information that the liquidator is sifting through. The format of this public inquiry by the liquidator is that he can summon and question anyone concerned with the collapse - put them on oath - and pursue any line of questioning. This is a very critical and powerful investigative tool.

B&B Subordinated Noteholders are in a unique position. They put BBL into administration (contrary to director advice). The B&B shareholders, as a consequence, have had their interest in the company wiped out. The AUD$600million (in capital value) noteholders now control what used to be a AUD$13billion company!

All the bank debt is with the still solvent (by the grace of the bankers) operating unit BBIPL. The bankers have had put in place a number of "firewalls" that prevent the owners of the BBL - the owner of BBIPL from effecting any reasonable control of their assets. How this structure was in the interests of the former shareholders and now noteholders will be a significant matter for investigation and inquiry ...

There are some direct sources of recovery from litigation and the claw back of assets.

Anything that BBL recovers will accrue directly to the noteholders. The banks won't get a sausage - because of the corporate structure of BBL and BBIPL. The bankers tried to get noteholders and shareholders to commit suicide. They succeeded with the shareholders (who should have voted the lot into administration). They did not succeed with the noteholders (the NZ noteholders put BBL into administration).

Noteholders have done everthing to protect their interests. This has taken a degree of collective courage that is quite remarkable in terms of recent corporate history! BBL is in liquidation with a liquidator with adequate funds to investigate without scrimping.

The liquidator must now call the shots to bring this episode to a conclusion. He has the power, he has the money, he has the professional support.

Noteholders must now simply wait for the process to grind ahead. "The wheels of justice grind slowly, but they grind exceedingly fine"

Last decent press coverage was in the AFR. Look to TheAustralian for the best coverage during the public investigation - when it begins. I will post updated dates to the thread as information comes to hand.

08-04-2010, 06:09 PM
Thanks for that summary Enumrate.

I have followed the discussion in the NSX section with your comments and appreciate the clarity you bring to this awful story.
It still baffles me how this infrastructure investing company could come so badly unstuck but I have no sympathy for the bankers at all.As I understand it,they contributed substantially to the collapse by withdrawing funding as the global credit crisis deepened and then tried to mitigate their losses by screwing noteholders ,shareholders and anybody else with an interest in the group.

I do think Deloittes could do a better job of keeping those of us with a continuing interest better informed as to progress.

I'm assuming you're Australian? so maybe be different but for NZ tax residents what's the treatment if you are a noteholder on revenue account...total writeoff,impairment charge,something else?

08-04-2010, 07:29 PM
My grateful thanks also, Enumerate. History in the making.

08-04-2010, 09:13 PM
I'm assuming you're Australian?

No, I'm a Kiwi. However, I am not a tax lawyer/accountant. I feel confident that there will be some recovery on the Notes ... but how you deal with any shortfall is a highly technical question.

I think the lack of news from the Liquidator is due to the fact that they are about to the bring the "legal stew" to a boil. They probably do not want any information to go to the "other side" in preparation for the "shock and awe" of the opening rounds of the public investigation.

Remember, they went from a declared profit of about AUD$690million at half year to a multi-billion dollar loss at full year. The Administrator report highlighted numerous director breaches. There are quite a number of people and organisations that will be worried by what is uncovered in court.

The extra time in preparation can only work in favour of the Noteholders.

15-04-2010, 08:59 AM
Public Examination of the Directors and Management to be scheduled for June.

Issues with Court bookings and the slow flow of information from BBIPL. At least there is now plenty of time to prepare.

18-05-2010, 03:29 PM
Babcock in black after support from banks
May 18, 2010

THE key operating business of collapsed infrastructure financier Babcock & Brown has swung dramatically back into the black, with a $7.3 billion turnaround in full-year profit.

However, the results - including a hefty $2 billion headline profit - do not signal a revival in fortunes for the fallen empire. Babcock & Brown International remains on life support from its bankers.

Documents obtained by BusinessDay reveal that Babcock & Brown International and its bankers recently finalised a ''pay if you can'' agreement covering a corporate debt facility of more than $2.57 billion.

This essentially means Babcock & Brown International's bankers have written off their entire exposure to the collapsed group, allowing it to pay down its debt only as cash is generated - mostly through asset sales.

''The group remains reliant on the support of its lenders through the continued extension of certain loan facilities and in particular that the lenders take no action in respect of existing breaches of the syndicated facility agreement,'' Babcock & Brown International's latest accounts said.

The listed Babcock was placed in liquidation March last year. It was essentially a shell that had a 99.8 per cent stake in the privately held Babcock & Brown International, the key operating business of the empire.

Only one director - former Babcock & Brown chief executive Michael Larkin- remains on the Babcock & Brown International board as it pushes ahead with its wind-up. Former Babcock chairman Elizabeth Nosworthy and a second director, Pat Handley, resigned in May last year.

The latest accounts show Babcock & Brown International notched up a $2 billion profit in calendar 2009. This compares with a loss of $5.3 billion a year earlier, largely due to savage write-downs.

The latest results were struck on $1.45 billion worth of revenue - mostly on asset sales - but restructuring of debt allowed the company to write back $2.7 billion.

Before this relief on corporate debt, Babcock & Brown International would have handed down a loss of $835 million.

The accounts also reveal the depths of Babcock's problems, with the company's liabilities outstripping assets by $3.67 billion. Without support from banks, this would be enough to tip any company over the edge.

Babcock & Brown International's auditor Ernst & Young warned there was ''significant uncertainty'' whether the company could continue as a going concern. It also raised doubts over whether Babcock & Brown International could raise enough funds from asset sales to cover its liabilities.

Source: The Age

24-05-2010, 07:33 AM
The Public Examination of B&B Management and Directors has been delayed to July. The list of people under examination has been increased and now includes Ernst & Young (the auditor). The examination will now take place over 7 days.

A litigation funder has been appointed to pursue selected recovery actions in the US.

The character of the banking consortium has changed, significantly. Alot of recovery hedge funds have bought the senior debt from the banks.

Despite the delays, everything is moving as to plan .... confidence people!

24-05-2010, 04:53 PM
$53m rent bill could fell Babcock survivor
May 24, 2010

AN ''ONEROUS'' rental bill agreed on when the good economic times were rolling could finally bring down the surviving operational arm of the failed Babcock & Brown group.

Babcock & Brown International Pty Ltd - in which B&B's main assets were housed and ringfenced from the collapse of its parent last year - has warned it will have to call in the administrators if it can't strike a new deal with the landlord of its Sydney headquarters.

BBIPL has been required to make a provision of $53 million in its latest financial accounts to cover the leasing terms for the space it has rented at Chifley Tower, one of the city's most prominent skyscrapers.

A variety of offshoots that sheltered under the B&B corporate umbrella were based at Chifley which has views over the Domain and the Harbour.

But the advent of the global financial crisis saw them and the main company encounter such severe financial difficulties that most of the B&B businesses cut back on their space in the tower (partly as a consequence of job cuts) or move out altogether to cheaper premises.

BBIPL escaped collapse only because it owes its bankers more than $2.5 billion. They are keeping it on life support while it spends the next two years selling off the group's remaining real estate, transport and power-generating assets to pay off its huge debts. However, the company is still responsible for the entire group's lease on Chifley even though it now takes up one floor of the tower only. It is understood to be paying as much as $15 million a year to lease another eight under-used or empty floors.

According to BBIPL's accounts for the financial year ending December 31 2009, the company is engaged in talks with the 42-storey tower's owner, the Singapore Government Investment Corporation, over its attempt to terminate the lease.

BBIPL added that the $53 million provision does not reflect the actual sum the company estimates it will end up paying SGIC to get out of the leasing deal.

However, there is still a real danger the company could be required to meet its obligations in full - a move which could result in it following B&B to the corporate graveyard.

''[Because] the company guarantees payments due under the lease, if a termination agreement cannot be reached with the landlord then it is likely the company would be placed in voluntary administration,'' BBIPL's chief executive, Michael Larkin, said in his sole director's report.
There is another article on smh.com.au stating they are not even trying to sublet about 9 floors, to the which has leasing agents stumped, as they have demand..

25-05-2010, 06:16 AM
Fact of the matter is that BBIPL (known, by Australians, as "Bipple") only exists because of the largess of the banking consortium (now the bank and hedge fund consortium). Administration of BBIPL would likely have a positive impact on the information flow from BBIPL and subsidiaries to BBL.

Knowing Larkin, there must be another reason why the administration of BBIPL is being "engineered" - the issue of the lease must be a "straw man", selected to force administration in support of a wider agenda.

The other interesting point is that secured creditors, under Australian insolvency law, cannot vote at a creditors meeting without giving up their secured status. BBL is a large, unsecured, creditor of BBIPL. Larkin is not about to hand control of the BBIPL administration to the Deloitte Liquidator.

Maybe the hedge funds have some aggressive plan to "trump" the BBL subordinated creditor rights by accepting unsecured status for their debt to control the administration?

I hope that this event crystallises focus on the "fairness" of the "restructuring agreement" that Larkin et al put together with the banks. These developments could prove to be a significant opportunity for BBL noteholders.

15-07-2010, 09:36 AM
I understood the liquidator was to conduct the public examinations over the past 2 weeks.
Anyone seen any reporting on this?

15-07-2010, 02:34 PM
I understood the liquidator was to conduct the public examinations over the past 2 weeks.
Anyone seen any reporting on this?

Due to various factors, the public examinations were delayed until the 20th of July with additional examinations scheduled for the 2nd of August.

20-07-2010, 07:58 AM
Public examinations get under way today. Ex boss Phil Green first on the stand.


20-07-2010, 07:09 PM
Coverage on BusinessSpectator:


Coverage in TheAustralian:


03-08-2011, 09:43 AM
Michael Warrington, on the Chris Lee web site, draws investors attention to the following report released by the liquidator:

http://www.deloitte.com/assets/Dcom-Australia/Local%20Assets/Documents/Services/CRG/Bus%20under%20admin/Babcock%20and%20Brown/Deloitte_BBL_Circular_to_Noteholders_and_Creditors .pdf

Three things are noted in the document:

1) Successful outcome to the Trust litigation in the US - backed by the litigation funder IMF

2) Mediation scheduled for 1-2 August over recovery of the unlawful dividend payments. Amount in dispute is AUD$158m. (Actually, this is "black letter law" - the payment is illegal, full stop)

3) The key observation is:

Due to the anticipated formal mediation, the Liquidators have concluded that they are not in a position to declare that the BBL Subordinated Notes have no value and are unlikely to have any value in the future.

"Not having" "no value" is quite possibly the same as actually having value - in accounting speak.

22-08-2011, 08:38 AM
For the record ... the following story was all over the Aussie business press, last week:


23-08-2011, 08:19 AM
Thanks for posting that link Enumerate. Is there likely to be any more court procedings started to recover further value do you think?

23-08-2011, 08:40 AM
The issues in mediation and potentially before the courts are to do with the illegal payment of dividends (from BBL). The auditors and the directors are culpable in this and the liquidator is looking for 160M.

We have not heard about all the other matters raised during administration - prospectus issues, Tricom payments, etc. (all listed in the administrators report).

Meanwhile, BBIPL continues to trade and to slowly unwind assets (for the benefit of the senior debtors):


It is only the gross unfairness of the "restructuring deal" that prevents bondholders from having a prospect of a recovery here. I have some ideas on how this "nut" can be cracked ... but this is not the forum to talk about litigation strategy ;)

Anyway - over 600M is owed to bondholders. They have had litigation success in the US. The next step is to deal with the dividend payment issues (potential recoveries at 160M). The step beyond this ... we need to wait and see.

23-08-2011, 11:16 AM
Yes, many thanks, Enumerate.

Let's hope that it hastens the parties concerned and their insurers towards a settlement!

20-09-2011, 02:23 PM


20-09-2011, 02:41 PM


[Liquidator,] Mr Lombe said he would apply to the court for the noteholders to receive a priority distribution. ''We have worked it through and had a successful mediated settlement. I think it is a good story, a good outcome for noteholders,'' he said.

Let's guess... 5 cents in the dollar?

13-02-2012, 07:18 AM


Babcock creditors' gamble pays off tenfold

13-02-2012, 08:30 AM
That is great to see those who contributed to the litigation getting a decent pay-out (not me, I'm afraid)! Might encourage more contributors in future and improve the chances of getting distributions.

Still doesn't appear to be any guidance on what the base distribution is though.

I was having a bit of a review on the weekend and came to the conclusion that I am so over fixed interest/debt markets. My early investments did okay, but in the last 10 years it seems many of them are issued with so many clauses and maturity options, that the issuer is bound to have at least one option for screwing debt-holders at the back-end (even assuming the issuer is still solvent).

When I lose money on shares, I make it back twice over in another trade.... doesn't work on debt.

13-02-2012, 08:42 AM
I am very pleased that at long last noteholders will be able to regain some of their capital from this investment.

Those that backed the litigation, of course, will do slightly better.

However, it would seem that Mr Larkin and his Goldman Sachs advisers have "got away with it". The billion$ of assets in BBIPL are being wound down in favour of the secured lenders. The noteholders who funded some of these assets are completely shutout. It has also be pointed out by the Administrator that the B&B Directors are potentially culpable for issues with Tricom payments, prospectus declarations, misleading the market (forecasting a 750M profit which turned into a multi-billion dollar loss less than 6 months later).

The prospects for the recovery of the remaining noteholder capital boil down to the question: "When will ASIC (the aussie regulator) act?).

To date, ASIC have done nothing. On the back of an ASIC prosecution - the noteholders could put a case to share in the B&B asset unwinding or to pursue the directly culpable.

In New Zealand, it you were fingered by an Administrator for dodgy dealings ... the regulators would act ... the directors would be facing the music in court. In Australia, the regulator simply watches while the financially crippled noteholders are left to carry the torch in the civil courts at their own expense.

The B&B story could actually have a completely happy ending, for the noteholders, if only ASIC would act!!

Good on the NZ noteholders for refusing the derisory offer of 0.1cent on the dollar. It has taken some time ... but at least noteholders have not made it easy for Mr Larkin and his dodgy mates to rob them blind.

13-02-2012, 08:53 AM
... I am so over fixed interest/debt markets.

I'd strongly urge you to reconsider this view.

There are some magnificent recovery situations, even now. Consider MXQ.ASX ... Macquarie Fortress has already paid out ...

Closer to home ... the European volatility is doing strange things with prefs like CASHA.NZX. You pointed out that the reset interest rates are driving down the capital value of these things ... however, CASHA went under 40 cents, at one point.

There are some other extreme punt situations ... like Bluestar BLUFC.NZX. This is actually a sound business, made viable by the recent restructuring. Well worth a detailed look.

18-05-2012, 05:14 PM
Some good news in a nasty day on the market as those who funded the legal action receive their first payout!

No indication yet of what is to be expected from the general distribution.

19-05-2012, 10:45 AM
what was the distribution per note?

19-05-2012, 11:00 AM
what was the distribution per note?

Not a pro-rata distribution but a refund to those creditors and noteholders who contributed $400 each to fund the legal action and a payment of 10 times the $400, ie a total of $4,400 to those parties. Capped at the total amount owed but in practical terms I doubt whether this would apply to many! This was the order from the Federal Court of Australia of 3 February 2012.

One would hope that the order was made in the expectation that there would be a general pro rata distribution to all creditors and noteholders at a later stage but we'll have to wait and see.

30-07-2013, 12:09 PM
A final distribution to creditors and noteholders was tentatively "scheduled" for June 2013. In response to an inquiry as to progress, the following reply was received from the administrators:

"Unfortunately the estimated date for distribution to noteholders has been delayed, due to several claimants undergoing legal proceedings against our adjudication as to their claims. We will be unable to move forward until these have been finalised, and as such, I am not able to provide guidance as to the timing of the distributions.

The latest update to noteholders can be found on the Deloitte Babcock and Brown website, located at:

Please see the circular to noteholders dated 5 April 2013.

We appreciate your patience in this matter."

Chances of a meaningful payout appear to be vanishing in a mist of legal and administrative costs, IMO.


02-08-2013, 09:01 AM
A final distribution to creditors and noteholders was tentatively "scheduled" for June 2013. In response to an inquiry as to progress, the following reply was received from the administrators:

"Unfortunately the estimated date for distribution to noteholders has been delayed, due to several claimants undergoing legal proceedings against our adjudication as to their claims. We will be unable to move forward until these have been finalised, and as such, I am not able to provide guidance as to the timing of the distributions.

The latest update to noteholders can be found on the Deloitte Babcock and Brown website, located at:

Please see the circular to noteholders dated 5 April 2013.

We appreciate your patience in this matter."

Chances of a meaningful payout appear to be vanishing in a mist of legal and administrative costs, IMO.


Thanks for the update macduffy

29-11-2013, 01:38 PM
As expected, the chances and timing of a dividend to Subordinated Noteholders recede further into the future. The latest estimate from the Liquidator hazards a date of February 2015, subject to ongoing legal proceedings. Meanwhile, Voluntary Administrators" and Liquidators" remuneration now totals over $4.4m since March 2009.

26-05-2015, 08:04 AM
An update, as at November 2014, if anyone's interested.

The Liquidator's annual report estimates that he will advertise notice of intention to declare dividend to subordinated noteholders in October 2015, if sufficient funds are available. Personally, I'm not holding my breath!

16-10-2015, 04:49 PM
The Liquidator tells me that there have been further delays in the legal process. I expect that there will be a formal report shortly - but no distribution meanwhile!