Remember Babcock & Brown, Australia’s greatest corporate failure? The brains behind it are at it again, finding corporate Australia in a forgiving mood.
Corporate Australia is nothing if not forgiving. And also pretty slow to learn from its mistakes.
Jodee Rich was the youngest member of the BRW Rich List in 1987 after creating computer reseller Imagineering. The company collapsed, but Rich was somehow able to rebound and create One.Tel, which grew to be valued at $5 billion — only to collapse as well. It appears that Phil Green and Trevor Loewensohn, two of the men behind Babcock & Brown, Australia’s biggest corporate failures, have managed to “do a Jodee” and rise from the ashes while corporate Australia happily gives them a second chance.
Loewensohn told The Australian Financial Review he planned to create a fund that would co-invest with his existing fund, Alceon, which Loewensohn formed in 2010 along with none other than former Babcock & Brown chief Green. Loewensohn had nothing but praise for Green, telling the Fin that Green is “the smartest guy I’ve met, and he’s got this brilliant ability to understand and structure risk”.
One suspects investors and lenders to Babcock — as well as investors in Babcock’s plethora of ill-fated satellite funds — wouldn’t be as glowing.
Babcock & Brown was almost the quintessential pre-GFC bubble stock. It started life as a leasing expert, with Green (a former tax lawyer) essentially assisting companies to reduce tax through complex strategies like cross-border leasing. As the boom started to really take off Babcock expanded, and like Macquarie Bank, made a fortune from managed satellite businesses, which were created to purchase infrastructure. Babcock’s share price reached a zenith of more than $34 in June 2007 — valuing the company at more than $10 billion.
Within a couple of years, the company would be worth nothing, as lenders clambered to retain any vestiges of value from the stricken shell.
Fortunately for Green, he received a large proportion of his remuneration in cash — during Babcock’s brief time as a listed entity, Green was paid $40 million in cash alone. In total, between 2006 and 2008, Green was paid $51.3 million, while Babcock shares slumped by 98.8%. Even after Babcock collapsed, Green managed to retain a swathe of valuable assets, including a Point Piper mansion, a 50% interest in a Hunter Valley property, and a valuable 5% stake in hotel owner Tourism Asset Holdings.
Loewensohn himself was a late arrival to the Babcock & Brown party, becoming an employee only in 2007 (receiving a relatively miserly, by Babcock standards, remuneration of $6.2 million that year). However, Loewensohn had also been a long-time adviser to Babcock when he was vice-chairman of UBS’ investment banking arm between 2003 and 2006.
Alceon appears to have been successful in the past few years. Since being formed in 2010, Loewensohn has boasted of doubling investors’ money in a short time through the purchase assets from Allco (like Babcock, another GFC failure) and Rams. Loewensohn says Alceon has $1 billion under management and that it has completed $2 billion worth of transactions for regional shopping centres, mezzanine investments and “residential parks”.
The AFR reports Loewensohn plans to raise around $70 million with his new fund, from investors who would best be defined as highly forgiving.
*Adam Schwab is the author of Pigs at the Trough: Lessons from Australia’s Decade of Corporate Greed, which profiled collapses from the GFC era, including the fall of Babcock & Brown