$53m rent bill could fell Babcock survivor
DANNY JOHN AND CAROLYN CUMMINS
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.
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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..