Lead Manager

BABCOCK & BROWN PROSPECTUS
OPERATING LEASING
Overview
Babcock & Brown’s operating leasing business manages a portfolio of over US$4.4 billion in assets within three
Business Units:
Babcock & Brown Aircraft Babcock & Brown Rail Babcock & Brown Electronics
Management (BBAM) Management (BBRM) Management (BBEM)
• Manages approximately 144
leased commercial jets
• Portfolio valued in excess of
US$3.8 billion
• Estimated to be sixth largest
portfolio of leased commercial
jets worldwide by value
• Manages over 10,000 freight
railcars in North America
• Portfolio value in excess of
US$600 million
• Relatively new business built
around a management team with
over 20 years’ combined average
experience
• Focused on trading, lease-portfolio
management and the creation of
financing products for
semiconductor manufacturing
equipment
Locations
Contribution to Net Revenue
USA, Europe, Japan
20%
24%
2003A
2004F
Babcock & Brown’s principal strategy in its operating leasing businesses is to acquire assets that can be placed
with appropriate long-term investors, while maintaining an ongoing management role.The assets are typically
held under investment structures designed by Babcock & Brown to optimise financial returns which are shared
between itself and investors.This model allows Babcock & Brown to rely on its investment selection and
structuring expertise, rather than its financial resources, to build its operating lease portfolios, allowing it to
compete effectively with better-capitalised competitors.
Babcock & Brown has minimal exposure to the residual risk on the leased assets it manages, with that exposure
typically limited to its ultimate income from remarketing or exit fees at the end of the lease term.This business
model has proven highly scalable and has allowed Babcock & Brown to grow its operating lease portfolios with a
relatively modest deployment of capital. Strong long-term relationships with debt and equity providers give
Babcock & Brown a significant competitive advantage.
Babcock & Brown earns revenue from asset-acquisition and syndication fees, ongoing management fees,
equipment trading and performance-based remarketing and exit fees. Management, remarketing and exit fees
have grown together with the size of the leased asset portfolios and, due to the long-term nature of most
management contracts, provide an element of highly reliable ongoing revenue.
Leveraging its in-depth knowledge of these asset classes and its investment selection skills, Babcock & Brown is
also active in acquiring assets for short-term resale, typically after it has added value by restructuring the lease
or completing a refurbishment or reconfiguration of the asset.These assets may be sold into a Babcock &
Brown-managed leased portfolio or to a trade buyer as dictated by market conditions.These asset trading
activities provide a useful hedge against downturns in the cyclical aircraft, railcar and semiconductor
manufacturing equipment markets as assets can be acquired at attractive valuations to then be sold at a profit
when market conditions improve.
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