Babcock and Brown about to go under?

25 November 2008

Ailing investment bank Babcock & Brown (B&B) saw a director move on from its ranks, at a time when it can ill afford such defections. Dieter Rampl, who is also chairman of the European banking group that is holding back on a critical $146 million deposit from the fragile investment company, quit B&B.

In a succinct statement to the stock exchange, Babcock announced the departure of Rampl and Joe Roby, chairman emeritus of Credit Suisse First Boston. Trading was suspended for Babcock a day ago on account of the long drawn dispute over the deposit.

Another quarter of worry was created by developer Lend Lease, which decided to cut in half the amount it was willing to pay for the group's share of retirement home business, Babcock & Brown Communities. With the bad news spreading fast, Queensland bank Suncorp-Metway also said that its provisions for bad debts would increase on account of loans to Babcock.

Rampl is chairman of Italian bank Unicredit, which is the parent of German bank HypoVereinsbank, which holds the deposit that is in dispute.

Unicredit took over Hypo in 2005, until when Rampl was CEO of Hypo. A report said that Hypo, which is part of an international bank syndicate, owed around $3.1 billion, and is believed to have usurped control of about $80 million it holds in a Babcock account. Babcock's company secretary Sue Glention, in a statement, said that the group was working to resolve the dispute, without naming Hypo.

Lend Lease too added to the investment bank's woes after picking up retirement spin-off Babcock & Brown Communities, acquiring Babcock's 12.5 per cent stake for $24.65 million, which is half the $49.3 million agreed earlier. Lend Lease would now control around 43.2 per cent of the Communities business.