Lead Manager

SECTION 3
BUSINESS OVERVIEW
Other
Overview
The Finance Leasing business also specialises in the following areas:
• Rail
• Shipping
• Manufacturing
• Media and telecommunications
• Lease securitisations
• Municipal financing
• Real estate
Babcock & Brown has been a market leader in US tax leasing arrangements. As a result of consistently creating
successful financing solutions for clients Babcock & Brown has enjoyed a high level of repeat business.
Until recently, the business has been almost exclusively advisory in nature, with the major focus being advising
either the equity investor (the lessor), or, more typically the lessee, who usually drives the finance leasing
transactions. In the latter case Babcock & Brown would advise the lessee on transaction structuring, arrange debt
financing and place the lease equity on behalf of its client. In both cases, Babcock & Brown would generally be
paid a success-based fee based on the size of the transaction. Like other areas within Babcock & Brown, the
Finance Leasing business is principally focused on more complex financing transactions which require innovative
solutions and strong structured finance execution expertise.
Following a recent proposed change to US tax laws, the market for US domestic tax-exempt and US
cross-border leasing products has been effectively shut down, reducing a significant source of historical revenue
for the Business Unit. Sections of the Finance Leasing business have therefore been significantly restructured in
response to this development through a combination of staff redeployment and reductions.This process is now
virtually complete and the Business Unit is focused on developing new areas of business to replace this lost
revenue.
Key drivers
Expenditure on “big-ticket” capital equipment and a preference by end-users to lease rather than acquire assets
are the fundamental drivers of this business. In recent years market conditions have been challenging due to lower
levels of capital expenditure in the US, combined with a low interest rate environment which encourages
debt-funded acquisition of assets rather than leasing.
Key risks
Since the Finance Leasing business is focused on sophisticated tax leasing solutions, its activities have the potential
to be more significantly impacted by changes in tax law and accounting regulations. As discussed, recent changes
to US tax law have resulted in the Finance Leasing business suspending activities in certain areas, particularly US
domestic tax-exempt and cross-border leasing.
Capital Markets
The Capital Markets business was established in 2002 to fulfil the following roles:
• Add value to Babcock & Brown’s principal activities by providing derivatives, debt capital markets,
securitisation and rating agency expertise to all other Business Groups
• Originate transactions as principal or create products for third-party clients through the use of securitisation
and derivatives and other capital markets instruments
• Invest in asset-backed securities and other capital market opportunities where appropriate by focusing on
asset classes where Babcock & Brown has expertise or a comparative advantage
The Capital Markets business has, to date, been principally focused on supporting other Babcock & Brown
Business Groups. It has, however, begun to develop products for external clients and invest in asset-backed
securities.These activities, whilst still in their infancy, are actively being pursued.
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