Lead Manager

BABCOCK & BROWN PROSPECTUS
Recent transactions executed by the Capital Markets business include:
• Arrangement and structuring of an $170 million bond repackaging of a participation in a 20-year project
finance syndicated loan. (See further case study on the Redbank Bond Repackaging below)
• Securitisation of the second instalment due from the Prime Infrastructure IPO.This involved obtaining a
strong investment grade credit rating for a debt offering secured against the second instalment and placing
this debt security with a capital markets investor
• Securitisation of two, 20-year, fixed rate leases to a quasi government agency into a 20-year floating rate
note.This involved bidding as principal to acquire the buildings and leases from the government.The
Capital Markets team obtained strong investment grade credit ratings from the rating agencies for the
floating rate note, sourced and priced the required interest rate swap and then placed the floating rate note
to capital markets investors
• Structuring and execution of an efficient interest rate hedging strategy for the debt raised for the acquisition
of DBCT
Case study Redbank bond repackaging
The Capital Markets business has extensive financing experience in the public and private US markets,
Euromarkets and the Australian capital markets. This experience was applied to execute a repackaging of
a $170 million participation in a $280 million 20-year, fixed rate unrated project finance loan for the
Redbank power station (Redbank) located in the Hunter Valley in New South Wales, Australia.
When a UK bank withdrew from project financing globally it was instructed to sell its $170 million
participation in the senior debt of Redbank which still had a remaining term of 20 years. This long
maturity meant that it was very difficult to sell its participation into the loan syndication market at an
acceptable price. After being mandated by the UK bank, the Capital Markets business evaluated the
different markets and priced the various financing alternatives available to place the loan participation
including the local Australian domestic capital markets, executing a Eurobond in the US Private
Placement market.
After fully examining the possible execution for each financing alternative, the Capital Markets business
advised the UK bank that its most efficient alternative to exit its participation was through a domestic,
monoline guaranteed capital markets issue (i.e. bond repackaging). The successful execution of the bond
repackaging required:
• Achieving strong investment grade ratings for the underlying $280 million, 20-year Redbank project
finance loan. To obtain the required ratings certain key loan terms had to be amended requiring the
co-operation of both equity investors in Redbank and the other Redbank senior lenders
• Working with a monoline insurer and its credit processes so as to obtain a AAA/Aaa guarantee for
the bond repackaging
• Restructuring the UK bank’s interest rate hedges so as to achieve the targeted hedging outcome for
the bond repackaging, and
• Working with an international investment bank in selling the bonds issued to capital markets
investors domestically and globally
Through utilising the Capital Markets teams global capital markets experience, combined with its
derivative expertise and knowledge of the rating agency process, Babcock & Brown was able to achieve
the optimal outcome for the UK bank’s sale of its participation in the Redbank senior debt.
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