Like a dying man whose life support was quietly turned off without a great deal of commotion, Babcock & Brown’s New Zealand subordinated note holders voted today against a restructuring plan, forcing the company to appoint voluntary administrators .

In an announcement to the ASX, Babcock stated that “while the Babcock & Brown Board believes that there will be value for BBIPL’s Corporate Facility lenders, it does not believe that there will be any value for equity holders, and holders of the Company’s subordinated notes following the completion of the BBIPL asset sale program.” Babcock shares had been suspended from trading on the ASX since 12 January 2009.

Administration marks the end for the Babcock mothership, once dubbed Macquarie Bank’s ‘Mini-me’. In its prime, Babcock was a voracious fee-generating machine, which, in 2007, had $72 billion worth of assets under management as well as 33 offices across the globe. In 2007, Babcock collected more than $700 million in performance, base and advisory fees from satellites including Babcock & Brown Infrastructure, Babcock & Brown Wind Partners and Babcock & Brown Power. BNB’s 2007 Annual Report claimed net assets of $2.5 billion.

Like other highly levered, boom-time companies (including MFS and Allco), the Babcock downfall has been swift. In July 2007, the company was valued by the market at $10 billion. Throughout its rapid rise, Babcock executives, including former CEO, Phil Green, were paid During its four years as a listed entity, Green collected more than $30 million in cash payments. Other Babcock executives also received generous total remuneration, including Eric Lucas ($45 million), Peter Hofbauer ($47 million) and Rob Topfer ($36 million).

Babcock’s collapse bears stark contrast to the confidence of its executives, who continued to exude confidence even as world economies started to crumble and the sub-prime crisis caused the cost of debt to rapidly and substantially increase. In March 2008, almost a year after the collapse of two Bear Sterns hedge funds, Green told Business Spectator that:

We’ve seen no evidence of any deterioration in valuation of those sort of infrastructure assets in the wholesale space. We accept that in the listed environment in Australia, really the only place those vehicles exist, there’s been deterioration in valuations, but we think that’s short term and we certainly don’t think it reflects the value that the global investor market place on the underlying assets.

In June 2008, as BNB shares slipped from $34 to less than $20, Babcock’s Kelly Hibbins accused Stephen Mayne of providing “inaccurate and unduly alarming for investors who look to commentators such as you for informed insight and guidance.” Mayne had previously suggested that Babcock was facing “imminent collapse”, a comment which appears to have been eminently prescient.

Earlier that month, Babcock reassured investors as to the stability of Babcock’s businesses, with Green noting that:

Babcock & Brown will continue the asset recycling and freeing up of capital that has previously been outlined to the market; de-leveraging our balance sheet and, further, will move to narrow our investment focus to core activities including development and co-investment.

Babcock & Brown has a significant pipeline of assets in greenfield development including wind (16,000 MW), solar (1,400 MW) and gas fired power generation (3,360 MW) assets, and power transmission assets; and PPP projects in countries around the world including selected countries in Europe, North America and Australia. Babcock & Brown’s development and acquisition pipeline is one of the key attractions for investors in both our wholesale and listed funds.

Babcock & Brown remains committed to investment in this pipeline to deliver a source of competitively priced, attractive assets for its managed funds platform.

Our employees remain strongly aligned and committed to the ongoing success of Babcock & Brown and its listed and unlisted funds. We have received significant levels of support from our partners globally who recognise the depth and expertise of Babcock & Brown’s people and business as evidenced by the announcement of the Angel Trains transaction in the UK last week.

Babcock’s administration does not immediately affect Babcock & Brown International Pty Ltd (BBIPL). Babcock’s announcement noted that, “BBIPL is the main operating and asset owning entity of the Babcock & Brown Group. BBIPL will continue to operate and will proceed with the orderly realisation of assets over an approximate 2-3 year time horizon to reduce debt.”

Babcock satellites, BBP, BBI, Babcock Japan Trust and Babcock & Brown Residential Land Partners released similar announcements noting that BNB’s administration does not of itself prevent BBIPL “from continuing to operate and comply with the terms of its corporate debt facilities.”

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