B&B hits another debt issue

Hard-pressed Babcock & Brown (B&B) has revealed it is facing new liquidity pressures — this time stemming from a debt facility provided by troubled US bank Wachovia.

B&B informed the Australian Securities Exchange (ASX) this week that a vehicle that holds US loan asset investments on behalf of a B&B joint venture with GPT had received a notice of acceleration under a debt facility provided by Wachovia Bank.

It said discussions between the parties were ongoing, but if the talks were not successful, the joint venture might suffer a loss upon the liquidation of the loan assets by Wachovia.

“The total amount of the Wachovia Bank loan is approximately US$112 million,” the ASX announcement said. “It is a non-recourse loan and therefore the maximum B&B/GPT joint venture exposure as a result of this action is limited to the equity invested plus retained earnings and amounts to approximately US$82 million.”

The announcement said this represented approximately 4 per cent of the joint venture’s ordinary and preferred equity and that due to the requirement of the joint venture agreement for ordinary equity to bear first loss across the portfolio, B&B’s maximum exposure to any potential loss would be the equivalent of 50 per cent of the joint venture’s exposure or approximately US$41 million.