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.
Suncorp executives were reported to have told analysts that their bad debt provisions might balloon to as much as 0.4 per cent of total loans, in part on account of unspecified loans to Babcock. The company's stock dropped three per cent to $6.70 a day ago, as news of its exposure to Babcock spread.
The Australian alternative asset manager Babcock & Brown was earlier reported to be offloading its Enersis wind energy business in Portugal to repay debt. Reports suggested that the value is estimated at around €1.15 billion ($1.4 billion), and that the sale is to a group of investors led by Magnum Capital. (See: Babcock & Brown sells wind energy assets in Enersis to repay debt)
Babcock has lost more than half its value since 6 November, when an analyst from ABN Amro predicted that the company might breach loan agreement on account of the global credit crisis, which has in turn made selling assets more difficult. The amount it has received from the sale would be utilised to pay A$9.6 billion of debt, and does not include the A$400 million Babcock & Brown committed to paying its bankers in June.