BABCOCK & BROWN

3.2.1 Source of Interest Payments
Babcock & Brown’s assets include A Class Shares in BBIPL
and the BBIPL Loan. The BBIPL Loan is expected to be
the primary source of funds by which Babcock & Brown
will service the Interest on BBSN. BBIPL is obliged to pay
Babcock & Brown interest on the BBIPL Loan equal to the
obligation of Babcock & Brown to pay interest on BBSN
and on the date such payment is due. It is expected that BBIPL
will be able to make payments under the BBIPL Loan.
In certain circumstances, BBIPL may be prevented, under
arrangements with BBIPL’s senior lenders, from making
interest payments to Babcock & Brown. For example, BBIPL
will be prevented from making such payments without senior
lender consent if:
• there is a continuing default under the Existing Corporate
Facility;
• there is a substantial reduction in the shareholding of the
Group by employees;
• more than 10% of certain key management individuals
leave the employment of the Group;
• Ordinary Shares are delisted or the average Ordinary
Share price declines by more than 25% in any quarter;
• any individual acquires more than 20% of the issued
Ordinary Shares; or
• net profit after tax is less than A$100 million or there is
an attachment against the assets of a member of the Group
other than BBIPL for more than A$20 million.
For a more detailed summary of the relevant restrictions
under the Existing Corporate Facility, see Section 8.9.
3.2.2 Source of Repayment
BBSN are unsecured notes issued by Babcock & Brown and
are Repayable on the Maturity Date and earlier in certain
limited circumstances, as described in Sections 1 and 2 and in
the Terms in Appendix B.
The BBIPL Loan is expected to be the primary source of funds
by which BBSN are Repayable. As the principal amount of the
BBIPL Loan is equal to the net proceeds of the BBSN,
Babcock & Brown will rely on dividends from BBIPL or
intercompany loans to fund the balance. As noted above, the
Offer proceeds are expected to be substantially employed in
short to medium term investment opportunities for the Babcock
& Brown Group. Accordingly, BBIPL is expected to be able
to repay the BBIPL Loan from its cash flows and regular
capital recycling and to pay dividends to Babcock & Brown.
3.3 Structure of the Offer
Babcock & Brown intends to issue up to 2.5 million BBSN at
an issue price of $100 each to raise up to $250 million, with the
ability to accept oversubscriptions for up to $50 million. There
is no minimum amount to be raised by the Offer.
The Offer comprises:
• a General Offer, made to Australian resident retail
investors;
• a Broker Firm Offer, made to Australian resident clients of
a Retail Broker who have received broker firm Allocations
of BBSN from that Retail Broker; and
• an Institutional Offer, made to certain Institutional Investors
who are invited to bid for an Allocation by the Lead
Manager & Bookrunner.
In the event of failure to raise the full amount contemplated
by the Offer, Babcock & Brown will rely on other funding
sources (including undrawn senior debt facilities of BBIPL)
to finance its activities.
3.4 Who may apply?
You may apply for BBSN if you are an Australian resident,
through the General Offer, or a Broker Firm Applicant,
through the Broker Firm Offer.
Institutional Investors may also be invited by the Lead Manager
& Bookrunner to bid for BBSN under the Bookbuild. No action
has been, or will be, taken to register or qualify BBSN or
otherwise permit a public offering of BBSN in any jurisdiction
outside Australia. BBSN may, at Babcock & Brown’s discretion,
be offered to Institutional Investors in a jurisdiction outside
Australia where such an offer is made in accordance with the
laws in that jurisdiction.
For information on the Allocation policy, see Section 3.10.
The Offer constituted by this Prospectus in electronic form
is available only to persons receiving this Prospectus in
electronic form in Australia.
3.5 When can you apply?
If you are a General Applicant, you can apply during the
General Offer Period, which is expected to begin on
21 November 2005 and close at 5.00pm on 14 December
2005. Application Forms and accompanying Applications
payments must be received by the Registry by the General
Offer Closing Date.
BABCOCK & BROWN SUBORDINATED NOTES 29