What sort of interest rates are Babcock & Brown satellites paying for the debt on such ventures as the Melbourne Royal Children’s Hospital and their US residential real estate? According to Jeremy Reid, CEO of Everest Babcock & Brown, it’s “mid-to-high teens”.
Reid should know – his piece of the Babcock & Brown jigsaw has some $432 million out on loan to other members of the puzzle.
You might think paying those sorts of interest rates would make it rather hard to turn a profit. They would have to be very good deals indeed.
Not that investors in the Everest Babcock & Brown Alternative Investment Trust (EBI) might realise they have such a large debt exposure to BNB projects. Chairman David Kent’s presentation and speech at the EBI AGM two weeks ago certainly talks about “Direct Investments” – 16 per cent of the $2.7 billion held in the trust, or 18 per cent of the active investments, if you discount the amount held in cash.
Flick to page nine of the chairman’s address and you’ll see a nice slide about “direct investments”, noting that they’re “Investment in ‘real’ assets e.g. essential services”. The top five “direct investments” are listed as:
TAHL US$27.4 million
Hospital PPP US$22.8 million
Coogee Resources US$16 million
B&B Apartment Investment Trust US$15.5 million
European Ports US$14 million
There are obviously a lot more to make up 18 per cent of the total EBI portfolio. And every one of them is a loan to a Babcock & Brown entity. That’s the Babcock & Brown that’s been monstered by the market every day this week, along with all its satellites.
The EBI AGM was short without a single question from the floor, but Stephen Mayne’s report of the Everest Babcock & Brown AGM (EBB manages EBI) gives the impression there was some critical discussion about EBI’s exposure to the BNB’s troubled Royal Children’s Hospital. One wonders if they might have been more if investors had realised just how close EBB/EBI was to Babcock & Brown which, through various entities, owns 28.3 per cent of EBB.
The sort of interest rates Babcock and Brown entities now pay and the extent of loans to the group by EBI were disclosed by Jeremy Reid in a full length interview to be published in tonight’s Eureka Report.
The interview was conducted before Babcock and Brown fell 30% yesterday and another 30% this morning – EBB was down 7% mid morning and EBI unchanged.