Babcock: Nosworthy video, Glover interview, EBB related deals, Leigh Hall and Stephen Loosely

February 2, 2010

Dear Mayne Reporters,

the mainstream media is starting to wake up to the enormity of this impending Babcock & Brown collapse.

I had this chat with 702 ABC Sydney's Richard Glover this afternoon pointing out that the $130 million Long Bay forensic hospital, $150 million worth of schools and the enormous $3.6 billion Reliance Rail maintenance contract for NSW trains are all Babcock deals.

What happens to all these contracts with the banks now seemingly in control, especially after today's dramatic across the board share market slaughter of anything called Babcock?

Even more startling was Michael Pascoe's interview with Everest Babcock & Brown CEO Jeremy Reid for tonight's Eureka Report and previewed in Crikey, which began as follows:

What sort of interest rates are Babcock & Brown satellites paying for the debt on such ventures as the Melbourne Royal Children's Hospital and their US residential real estate? According to Jeremy Reid, CEO of Everest Babcock & Brown, it's “mid-to-high teens”.

Reid should know – his piece of the Babcock & Brown jigsaw has some $432 million out on loan to other members of the puzzle.

What the hell is a supposedly independent hedge fund doing lending $432 million in related party deal to Babcock associates? Babcock CEO Phil Green sits on the EBB board and, along with his Babcock colleagues, clearly has enormous influence over the investment decisions.

This revelation makes the following email I've just sent to Babcock spinner Kelly Hibbins even more interesting:

Kelly, I refer to this line in yesterday's response to the ASX query: “Further, it should be noted that there are no cross shareholdings or loans between our listed funds,” Mr Green concluded.

Does that mean the $200m unsecured loan from B&B Infrastructure to a Babcock & Brown subsidiary as at December 31 has been repaid in full?

Regards, Stephen Mayne

If the loan is outstanding and ends up not being repaid in full, then the independent directors of BBI, including former AMP investments boss Leigh Hall, will almost certainly get sued.

Corporate governance and independent directors kick in when things go pear-shaped and there are almost 20 independent directors of various Babcock vehicles who will really be earning their keep in the coming months.

The most senior is Elizabeth Nosworthy so we've packaged up this illuminating vision from the recent Babcock AGM when we slugged it out on the question of whether she really was independent.

In other coverage, there was also these two Babcock stories I wrote for Crikey today:

Babcock collapse to be a global blockbuster
Time to sack Phil Green

And we've packaged up all our video, audio and written coverage into this multi-media offering on the site.

Finally, political reporter Alex Mitchell has sent through the following snippet on the way Babcock does business:

In the NSW Legislative Council on April 2, Greens MP Sylvia Hale asked Lands Minister Tony Kelly:

"Is the Minister aware that Babcock & Brown, a partner in the project to develop a resort at the Killalea State Park, has donated more than $300,000 to the NSW branch of the Australian Labor Party since expressions of interest in the project were called in 2003, including an average of more than $10,000 a month in the nine months of negotiations leading up to the granting of a 50-year lease agreement? Has the Minister or any of his staff had discussions with former Australian Labor Party national president and senator, and now Babcok & Brown adviser, Stephen Loosley, about the Killalea project? Was the Minister aware at the time that he approved the lease agreement that Babcock & Brown was a major donor to the NSW ALP?"

Kelly replied that he had no knowledge of any political donations from B&B and there the matter ended.

For the record, Loosley, a former general secretary of the NSW ALP, currently holds a senior executive position with the fast-imploding Babcock as its "Principal Strategic Adviser".

Defence Minister Joel Fitzgibbon has just appointed Loosley to chair a community consultation panel to contribute to the new defence white paper.

When will federal Labor ever learn?

Do ya best, Stephen Mayne

* The Mayne Report is a multi-media governance website published by Stephen Mayne with occasional email editions. To unsubscribe from the emails click here.