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  1. #11
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    $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..
    Rgds

  2. #12
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    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.
    Do not consider my postings as investment advice. I am here to share research and to speculate on what might be. The boundary between fact and conjecture might not always be clear - best to treat all comments as speculation.

  3. #13
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    I understood the liquidator was to conduct the public examinations over the past 2 weeks.
    Anyone seen any reporting on this?

  4. #14
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    Quote Originally Posted by i_claudius View Post
    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.
    Do not consider my postings as investment advice. I am here to share research and to speculate on what might be. The boundary between fact and conjecture might not always be clear - best to treat all comments as speculation.

  5. #15
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    Public examinations get under way today. Ex boss Phil Green first on the stand.

    http://www.smh.com.au/business/babco...719-10hwj.html
    Last edited by macduffy; 20-07-2010 at 07:59 AM.

  6. #16
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    Do not consider my postings as investment advice. I am here to share research and to speculate on what might be. The boundary between fact and conjecture might not always be clear - best to treat all comments as speculation.

  7. #17
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    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-..._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:

    Quote Originally Posted by Deloitte Liquidator
    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.
    Do not consider my postings as investment advice. I am here to share research and to speculate on what might be. The boundary between fact and conjecture might not always be clear - best to treat all comments as speculation.

  8. #18
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    For the record ... the following story was all over the Aussie business press, last week:

    http://www.smh.com.au/business/liqui...818-1j09h.html
    Do not consider my postings as investment advice. I am here to share research and to speculate on what might be. The boundary between fact and conjecture might not always be clear - best to treat all comments as speculation.

  9. #19
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    Thanks for posting that link Enumerate. Is there likely to be any more court procedings started to recover further value do you think?

  10. #20
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    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):

    http://www.theage.com.au/business/ba...0517-v99z.html

    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.
    Do not consider my postings as investment advice. I am here to share research and to speculate on what might be. The boundary between fact and conjecture might not always be clear - best to treat all comments as speculation.

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