Lead Manager

SECTION 3
BUSINESS OVERVIEW
Background
Babcock & Brown’s operating lease business grew out of the Group’s long history as an advisor and arranger of
sophisticated finance leasing transactions.
In 1986, Babcock & Brown formed a joint venture company with the Nomura Group, Nomura Babcock &
Brown (NBB), to market and syndicate aircraft subject to operating leases into Japan. Babcock & Brown’s aircraft
operating lease group (BBAM) was formed in 1989 to leverage the resulting demand from Japanese private equity
investors for leased aircraft. BBAM is now the leading arranger of syndicated aircraft finance in the Japanese
market and manages the world’s sixth largest portfolio of leased commercial jets by value.
Having identified the opportunity to extend the skills gained through aircraft leasing to railcars, the rail division
was formed in 1999 when Babcock & Brown hired a team of senior professionals from CIT, including the
President of its Rail Division.This business has grown rapidly and now manages over 10,000 railcars.
The model was further extended to semiconductor manufacturing equipment in June 2002, when a team of
senior professionals joined Babcock & Brown from Comdisco after the electronics portfolio of Comdisco was
sold.The team has a track record of over 20 years in the semiconductor manufacturing equipment industry.The
team has closed over US$5 billion in leasing transactions and provided equipment advisory services on more than
US$500 million of additional transactions prior to joining Babcock & Brown.
Business activities
Aircraft: Babcock & Brown Aircraft Management
BBAM’s primary activities are:
• Acquiring and selling aircraft to both trade and financial buyers
• Arranging aircraft leases with end users
• Providing management and remarketing services to investors
On occasions, BBAM will acquire aircraft where there is either no lease in place or only a short lease term
remaining. BBAM will then seek to reposition the asset, often by negotiating a new lease or reconfiguring the
aircraft prior to resale.
Babcock & Brown has a longstanding, mutually exclusive joint-marketing arrangement with NBB, which is now
the leading arranger of syndicated aircraft finance in the Japanese private equity market. Over the last 15 years
BBAM has syndicated 145 aircraft into the Japanese private equity market through NBB.
Although NBB was originally jointly owned by Babcock & Brown and Nomura, Nomura purchased Babcock &
Brown’s stake in NBB in 1999 and NBB is now wholly owned by Nomura. Babcock & Brown and NBB
continue to co-operate under a mutually exclusive joint-marketing arrangement in the same manner as prior to
this change in ownership, maintaining a longstanding relationship that continues to be mutually beneficial and
profitable for both parties.
In a typical transaction BBAM will identify an aircraft, negotiate its purchase or arrange a lease to a creditworthy
aircraft operator (often the vendor) and source non-recourse finance. BBAM will often warehouse the aircraft in
a special purpose vehicle, funded by NBB, prior to syndication.
Equity in the vehicle will then be syndicated into Japan via NBB. Fees on syndication plus any profit on the sale
of the aircraft are shared equally between BBAM and NBB. BBAM provides ongoing management services,
remarketing services at the end of the lease and, at the appropriate time, manages the sale of the aircraft. BBAM
typically receives fixed percentage fees for management and remarketing and a base fee plus an incentive fee on
disposal, all of which are shared with NBB on a pre-agreed basis.
BBAM is a global business with professionals located around the world, and an international client base,
principally consisting of European and Asian airlines.
66