INVESTOR PRESENTATION BABCOCK & BROWN SUBORDINATED NOTES

Transcription

1 INVESTOR PRESENTATION BABCOCK & BROWN SUBORDINATED NOTES

2 Agenda 1. BBSN Offer Summary Information about Babcock & Brown Use of proceeds Financial Information Key Terms Bookbuild and Timing 2

3 BBSN Offer Summary Security: Issuer: Guarantee: Issue amount: Interest: Unsecured, subordinated, cumulative, resettable notes Babcock & Brown Limited (BNB) Guaranteed on a subordinated basis by Babcock & Brown International Pty Limited (BBIPL) A$250 million with the ability to accept oversubscriptions for up to $50 million Gross pay, floating rate and semi-annually until the first Reset Date First reset date: 15 November 2010 Maturity date: 15 November 2015 BBSN Holders Gross offer proceeds BBSN Babcock & Brown Limited 100% ownership Ordinary shareholders Net offer proceeds (BBIPL Loan) 71% ownership BBIPL 29% ownership US Executive Stakeholders Operating companies 3

4 Agenda 1. BBSN Offer Summary Information about Babcock & Brown Use of proceeds Financial Information Key Terms Bookbuild and Timing 4

5 Background of Babcock and Brown BABCOCK & BROWN SUBORDINATED NOTES Listed on ASX October Equity capitalisation of $5.8 1 billion Babcock & Brown formed in San Francisco 1977 Formed a joint First UK PFI AIDC venture company with project acquisition Nomura (NBB) to carry out Japanese cross border leasing 1986 Japanese Real Estate business established 1998 HVB injects capital and takes 20% stake 2000 Asian Infrastructure business established 2002 European Real Estate business established 2003 Aircraft operating leasing business established (BBAM) (JV with Nomura) 1989 Sydney office opens First cross border lease executed First Real Estate principal investments in Australia Early 90's Commencement of non-leasing structured finance business outside Australia Rail leasing business established (BBRM) 1999 First major Corporate Principal Investment (AUSDOC) 2001 Prime Infrastructure floated on ASX 2002 Electronics leasing business established (BBEM) 2002 BNB IPO Oct 2004 Advisory Investment management Principal participation Principal investment 1. Shares in Babcock & Brown and shares held in BBIPL (other than by Babcock & Brown) have materially equivalent rights and hence are aggregated for the purposes of the Group equity capitalisation figure. 5

6 Business model Three principal business activities Financial advisory Principal investment Funds management Focus on maximising revenue and ROE through integrated model Origination through advisory and/or development including greenfield development Securing/profiting from opportunity through principal investment Recycling capital through Specialised Asset and Funds Management platform Generating passive and recurring management fee income through Specialised Asset and Funds Management platform Recurring transaction and investment banking fees from managed funds Funds and assets under management provide a platform for further origination activity Principal Investment Funds Management Financial Advisory 6

7 Operating divisions BNB operates through five business groups Real Estate, Corporate Finance and Infrastructure and Project Finance groups are focused on advisory, investment management and principal investment Operating Leasing group, operates in aircraft, rail and electrical equipment. Includes investment management and principal investment Structured Finance group, traditionally advisory in nature. Increasingly focused on the underwriting, structuring and distribution of investment transactions Specialised Asset and Funds Management platform sits across the five business groups Specialised Asset and Funds Management platform Real Estate Corporate Finance Operating Leasing Structured Finance Infrastructure and Project Finance BNB Aircraft Mgt (BBAM) Special Products BNB Rail Mgt (BBRM) Finance Leasing BNB Electronics Mgt (BBEM) Capital Markets Eurorail 7

8 Funds and asset management platform BABCOCK & BROWN SUBORDINATED NOTES $ 17.4 billion of total specialised funds and assets under management as at 4 November 2005 As at 4 November 2005 Ownership % FUM/AUM ($m) Mkt Cap ($m) Listed Babcock & Brown Capital Limited (BCMCA) 6% 1, Babcock & Brown Infrastructure Group (BBI) 7% 4,500 1,608 Babcock & Brown Environmental Investments (BEI) 32% Babcock & Brown Japan Property Trust (BJT) 5% Babcock & Brown Wind Partners (BBW) 15% 1, Everest Babcock & Brown Alternative Investments (EBB) 5% Total Listed Funds 7,663 3,807 Unlisted Babcock & Brown Global Partners 7% 598 BGP Investment Sarl (GPT JV) 50% 2,300 UK Retail Syndicates - 34 Total Unlisted Funds 2,932 Private equity Babcock & Brown Direct Investment Fund 15% 66 Total Private Equity Funds 66 Specialised Assets Under Management Operating Leases 6,100 PPPs 609 Total Specialised AUM 6, $500m call is due in Feb 2006, but may be deferred for six months. 8

9 Earnings composition Result for six months to 30 June 2005 represents 80% of the 2005 full year IPO forecast Result driven by strong contributions from Real Estate and Corporate Finance versus prospectus and solid levels of activity across other business units Reflects success in deploying and recycling new capital and converting opportunities that have emerged following listing Result reflects the scalability of BNB cost structure Net revenue by division for six months ended 30 June 2005 Net revenue by type for six months ended 30 June 2005 Net revenue by region for six months ended 30 June % 20% 17% 11% 45% 38% 43% 13% 17% Real Estate Infrastructure & project finance Operating lease Structure finance 42% Advisory Investment management Principal investment 40% Asia Pacific Europe North America Corporate finance 9

10 Outlook General business outlook BNB has established a business platform capable of generating growth going forward Specialist funds have strong access to capital to fund future growth. This includes capital raised within Babcock & Brown Global Partners, Babcock & Brown Capital, Babcock & Brown Environmental Investments, our joint venture with GPT and Babcock & Brown Wind Partners Assuming performance continues both Babcock & Brown Infrastructure and Babcock & Brown Japan Property Trust have access to capital markets to fund further acquisition opportunities Employee base has been expanded over the last 12 months, presently more than 600, in specialist areas to drive future growth and in areas necessary to support the growth Significant investment and business opportunities identified 10

11 Agenda 1. BBSN Offer Summary Information about Babcock & Brown Use of proceeds Financial Information Key Terms Bookbuild and Timing 11

12 Use of proceeds Significant transaction activity since IPO A$2.7 billion raised by Specialised Asset and Funds Management platform 22-Dec-04 GWP acquires 158 MW wind farms in Spain 14-Feb-05 - Capital deployment 17-Nov-04 Royal Melbourne Showgrounds Redevelopment A$6m 16-Nov-04 CBRail JV acquisition 24-Nov-04 Increase stake in GAS to 7.6% A$22m BCM -BNB A$100m investment 17-Jan-05 Real estate transactions across Europe A$1.1bn 15-Feb-05 EBB A$15m stake 9-Mar-05 Golden Circle financing A$50m 15-Apr-05 A$175m bridge loan facility to Prime for A$600m IEG acquisition 24-Mar-05-10% investment in BJT A$14m 16-Mar-05 GWP investment A$13.8m 26-Apr-05 A$340 million Braemar Power Project, with BNB to invest up to 60% of the equity 3-May-05 JV with GPT - BNB $100m investment 23-Sep-05 Acquisition of 10.6% of East Surrey Holdings A$102m 18-Jun BBI capital raising A$26m 29-Sep-05 Acquisition of Multiplex's interest in JV betweenprimelife, Multiplex and BNB A$5m 10-Oct Eircom - investment by BCM A$55m 24-Oct Investment in Pace A$9m 26-Oct BBW 15% Investment A$39.3m 14 Feb-05 BCM A$1b 4-Feb-05 BJT A$300m 8-Apr EBB A$300m 05-Jul -05 BEI restructure and capital raising - A$13.5m BNB debt converted to equity 12-Jul Sep-05 BNB vendor of certain BBW assets 06-Oct BNB IPO A$ Apr-05 A$550m facility to refinance existing facilities and provide undrawnfunding for future requirements B&B Global Partners - Unlisted A$550m investment fund Capital recycling/raising 12

13 Use of proceeds Rate of transactions has exceeded expectations, resulting in: Significantly higher profits than was envisaged at time of IPO Employment of funds raised at IPO Significant pipeline of further opportunities over the short to medium term Additional capital being sought to improve balance sheet efficiency and reinforce capacity to capitalise on pipeline Up to $300m from BBSN offer $300m project-specific acquisition finance facility Up to $450m increase to corporate facility Proceeds of BBSN Offer applied to generally invest in the various business and investment opportunities available to BNB Number of specifically identified projects exist Equity investment in an unlisted aircraft fund Equity investment in US freight rail car syndication Investment in wind turbines Development of wind farms in the US and Australia Development of thermal power stations 13

14 Interest coverage ratios The interest coverage ratio of BNB and the effect on interest coverage under the following three scenarios for the six months ended 30 June 2005 is as follows: Interest Coverage Ratio 1 Actual Interest Coverage Ratio 2, 3 Existing Corporate Facility as at 30 June times Scenario 1 Existing Corporate Facility on the assumption it is fully drawn for the 8.9 times six months ended 30 June 2005 Scenario 2 Existing Corporate Facility on the assumption it is fully drawn for the 6.1 times six months ended 30 June 2005 and $250million BBSN issue on 1 January 2005 Scenario 3 Existing Corporate Facility on the assumption it is fully drawn for the six months ended 30 June 2005 and $300million BBSN issue (assuming over-subscription of $50million) on 1 January times 1. The interest coverage ratios have been calculated as profit from continuing operations before income tax expense divided by interest expense excluding interest on non-recourse debt. In the calculation of the interest coverage ratios an assumed Margin of 215 bps has been adopted. 2. Assumes that interest is earned at the rate of 5.70% on the $250 million proceeds of the BBSN issue and on the proceeds of the additional draw down of the Existing Corporate Facility. Finance costs attributable to the Existing Corporate Facility during the period ended 30 June 2005 were $4.6 million. 3. In calculating the interest coverage ratio it is assumed the senior debt is drawn in Australian dollars and is drawn on a fully funded basis rather than drawn for letters of credit. All interest coverage ratios have been calculated post bonus expense Assuming the existing corporate facility and all additional facilities are fully drawn, and conservative reinvestment rate of 5.70%, interest coverage is equal to 3.6 times 14

15 Agenda 1. BBSN Offer Summary Information about Babcock & Brown Use of proceeds Financial Information Key Terms Bookbuild and Timing 15

16 Income statement Consolidated Income Statement $ 000 AGAAP Period from 6 Oct 2004 to 31 December 04 Actual 1 AGAAP 12 months ended 31 December 2004 pro-forma 1&2 AIFRS 6 months ended 30 June 05 Actual 3 Revenues from continuing operations 562, , ,765 Expenses from continuing operations, amortisation and restructure (414,071) (334,900) (214,830) costs excluding finance costs and bonus expense Finance costs 4 (15,346) (63,905) (48,753) Share of net profits of associates 9,831 18,870 27,725 Bonus expense (including amortisation of share options and bonus deferred rights) (98,474) (148,245) (126,743) Profit from continuing operations before income tax expense 44, , ,164 Income tax expense (18,821) (29,305) Net profit 25, ,859 Minority interest excluding BBIPL (8,282) (7,705) Net profit attributable to the Babcock & Brown Group, 17, ,154 including BBIPL BBIPL minority interest (4,890) (31,927) Net profit attributable to Members of Babcock & Brown 12,252 78,227 Notes: 1. The financial information for this period is based on the following exchange rates US$0.7366; ; ; The pro forma result for the 12 months ended 31 December 2004 is only provided to the level of operating profit before tax. See note 2. to the Consolidated Income Statement in section 5.3 of the Prospectus for a description of the calculation of the pro-forma for the 12 months ended 31 December The financial information for this period is based on the following exchange rate per A$ US$0.7750; ; ; Includes finance costs attributable to non-recourse debt as well as the Existing Corporate Facility. Finance costs attributable to the Existing Corporate Facility during the six month period ended 30 June 2005 were $4.6 million. 16

17 Balance sheet $ 000 Assets AIFRS 30 June 2005 Pro-forma adjustments AIFRS pro-forma 30 June 2005 Cash and cash equivalents 308, , ,711 Receivables 651, ,079 Investments accounted for using the equity method 553, ,276 Finance Leases 166, ,145 Transportation equipment 314, ,953 Real estate held for sale 134, ,934 Real estate held as investment property 87,951 87,951 Assets under development 331, ,327 Intangible assets 4,684 4,684 Other assets 6 399, ,248 Total Assets 2,952, ,000 3,202,308 Liabilities Accounts payable and accrued liabilities 214, ,049 Interest bearing liabilities 2 : Transportation equipment notes payable 458, ,762 Real estate notes payable 265, ,718 Other notes payable 3 778, , ,028,686 Other liabilities 377, ,189 Total Liabilities 2,094, ,000 2,344,404 Net Assets 857, ,904 Gearing ratio % 7.20% Notes: 1. Assumes $250 million of BBSN issued on 30 June 2005, and that the gross proceeds of the Offer are held as cash. 2. Interest bearing liabilities, with the exception of the Existing Corporate Facility of ($66 million drawn as at balance date), are recourse only to the assets of certain special purpose vehicles in the Babcock & Brown Group. 3. Other notes payable includes the Existing Corporate Facility. 4. BBSN liability recorded as other notes payable. 5. Existing Corporate Facility divided by net assets plus Existing Corporate Facility less intangibles. 6. Includes deferred tax assets, fees receivable and all investments in financial assets available for sale. 17

18 Agenda 1. BBSN Offer Summary Information about Babcock & Brown Use of proceeds Financial Information Key Terms Bookbuild and Timing 18

19 Key Terms General Issuer Security Offer Maturity Date ASX quotation Babcock & Brown Limited BNB Subordinated Notes (BBSN) are unsecured, subordinated, cumulative, resettable notes. 2.5 million BBSN at an issue price of $100 per BBSN to raise $250 million, with the ability to accept oversubscriptions for up to $50 million. 15 November On the Maturity Date, all outstanding BBSN must be either Repaid, or, if a Holder requests an Exchange and BNB agrees, then Exchanged. Application will be made to ASX for quotation of BBSN within seven days after the lodgement of this Prospectus. 19

20 Key Terms Interest Interest Rate Market Rate for the first Interest Period Until the first Reset Date = Market Rate + Margin where: the Market Rate is the six month Bank Bill Swap Rate on the first Business Day of the Interest Period. the Margin will be determined by a Bookbuild. Interest will be payable semi-annually in arrears. The greater of the Market Rate on the last day of the Bookbuild and Settlement Date. Deferral conditions Deferred Interest BNB is insolvent or such payment would cause it to become insolvent; such payment would cause BNB to breach any legal obligation; or Directors determine that BNB has insufficient cash to make the Interest Payment. Interest will accrue on any Outstanding Interest on a daily basis at the Interest Rate plus 2.00% per annum. Deferred Interest remaining unpaid must be paid on the next Interest Payment Date where no Interest Payment deferral condition applies. Restrictions on BNB Until Outstanding Interest is paid in full, BNB will be prevented from: declaring and paying any dividend or making any return of capital or other payment to its shareholders; setting aside any cash or assets for that purpose; and undertaking any arrangement, reconstruction or reorganisation, which would have a material adverse effect on the value of the BBSN. 20

21 Key Terms Reset Process & BNB Exit Rights Reset Date First Reset Date: 15 November Reset of terms On each Reset Date, BNB may change certain terms of BBSN including: the next Reset Date, provided that each Reset Date will be no less than 12 months after the immediately preceding Reset Date and will also be an Interest Payment Date; the Exchange Discount; the Market Rate (including from a floating rate to a fixed rate); the Margin; and the Interest Payment Dates. BNB initiated Repayment, Exchange and Resale BNB may Repay all or some of the BBSN on a Reset Date. BNB may Repay all BBSN: on occurrence of a Change in Law Event; on occurrence of a Change in Control Event; on occurrence of a Delisting Event; or if the aggregate Face Value of BBSN on issue is less than $50 million. 21

22 Key Terms Investor Exit Rights BABCOCK & BROWN SUBORDINATED NOTES Investor initiated Repayment and Exchange Holders may provide an Exit Notice requesting Exchange in relation to: a Reset Date; a Trigger Event (Holders may also request Repayment); a Change in Control Event; or the Maturity Date. BNB action upon receipt of an Exit Notice Where a Holder requests Exchange, BNB may Exchange, Repay or Resell BBSN (or a combination of Exchange, Repay and Resell); Where a Holder requests Repayment, BNB may Repay or Resell BBSN (or a combination of Repay and Resell). Exchange into Ordinary Shares Upon Exchange the number of Ordinary Shares delivered to a Holder for each BBSN will be calculated as: Repayment Amount / (VWAP x (1 - ED)) Where: ED is the Exchange Discount of 2.5% (subject to change on a Reset Date). Repayment Amount is the Face Value plus any Outstanding Interest as at the Realisation Date that will not be separately paid in cash as interest on the Realisation Date. Resale Upon Resale, BNB must ensure that the Holder is paid an amount at least equal to the Repayment Amount on the Realisation Date. 22

23 Key Terms Subordination & Guarantee BABCOCK & BROWN SUBORDINATED NOTES Subordination on payments BBSN are subordinated to all other debt of BNB. BNB may issue debt ranking ahead of BBSN in right of any payment including payment of Interest and on a Winding Up. Winding Up On a Winding Up the rights of Holders are subordinated in right of payment to the claims of any creditors of BNB from time to time other than those whose claims are stated to rank equally with, or after, the claims of Holders. Guarantor BBIPL. Guarantee BBIPL guarantees any amounts which become due and payable by BNB on BBSN. Claims under the Guarantee are subordinated to the claims of all creditors of BBIPL (other than creditors whose claims are expressed to rank after or equally with the claims of Holders under the Guarantee), but in priority to the claims of BBIPL shareholders. BBIPL may enter into any transaction without restriction including issuing other indebtedness ranking ahead of claims of Holders under the BBIPL Guarantee. As the payment of Interest is subject to deferral conditions, the Guarantee does not ensure that interest will be paid in all circumstances. 23

24 Agenda 1. BBSN Offer Summary Information about Babcock & Brown Use of proceeds Financial Information Key Terms Bookbuild and Timing 24

25 Syndicate Structure & Bookbuild BABCOCK & BROWN SUBORDINATED NOTES Lead Manager & Bookrunner Senior Co-Managers Grange Securities Limited Co-Managers Bell Potter Securities Limited Commonwealth Securities Limited Ord Minnett Limited Tricom Equities Limited UBS Private Clients Australia Limited Indicative bookbuild range of 2.00% to 2.30% Close for brokers: 10:00am Thursday 17th November 2005 Close for institutions: 11:00am Friday 18th November 2005 Institutional allocations can only be received from the Lead Manager & Bookrunner 25

26 Key Dates Key dates for the Offer 1 Time & Date Announcement of Offer and Prospectus lodged with ASIC 9 November 2005 Roadshow 9 14 November 2005 Bookbuild November 2005 Bookbuild close for brokers 10:00 am 17 November 2005 Bookbuild close for institutions 11:00 am 18 November 2005 Margin announced and Opening Date 21 November 2005 General Offer Closing Date 5:00 pm 14 December 2005 Broker Firm Offer Closing Date am 19 December 2005 Settlement Date 20 December 2005 Issue Date 21 December 2005 BBSN begin trading on ASX (deferred settlement basis) 22 December 2005 Holding Statements despatched by 28 December 2005 BBSN begin trading on ASX (normal settlement basis) 29 December 2005 Key dates for BBSN 1 First Record Date for Interest Payment 7.00pm on 8 May 2006 First Interest Payment Date 15 May 2006 First Reset Date 15 November 2010 Maturity Date 15 November These dates are indicative only and may change 26

27 BBSN Offer Contacts Babcock & Brown Limited Phillip Green, Managing Director, Michael Larkin, Chief Financial Officer, Kelly Hibbins, Investor Relations, UBS Investment Bank Dane FitzGibbon, Hybrid Capital, Simon Maidment, Syndicate, Guy Foster, Syndicate,

28 Disclaimer for presentation The information in this presentation is an overview and does not contain all the information necessary to make an investment decision. In making an investment decision, investors must rely on their own examination of BNB and BBSN, including the merits and risks involved in an investment in BBSN which will be set out in detail in the prospectus to be lodged by BNB (the Offer Document). This presentation has been prepared in good faith, but no representation or warranty, express or implied, is made as to the accuracy, reliability or adequacy of any statements, estimates, opinions or other information contained in this presentation (any of which may change without notice). To the maximum extent permitted by law, the BNB Group (including Babcock & Brown Asset Holdings Pty Limited) and UBS AG and their respective directors, officers, employees and agents and any other person involved in the preparation of the Offer Document disclaim all liability and responsibility (including without limitation any liability arising from fault or negligence) for any direct or indirect loss or damage which may be suffered through use or reliance on anything contained in, or omitted from, this presentation. It is not intended that this presentation contain any prospective financial information and any statements which may be construed as such should not be so construed or where such a construction is unavoidable, such information has been based on current expectations about future events and is subject to risks, uncertainties and assumptions that could cause actual results to differ materially from the expectations described. The Offer Document is subject to further revisions, and you should wait to receive the fully detailed Offer Document, and read and consider it in full, before making any decision to acquire BBSN. An electronic copy, with details of how to register to receive a hard copy, is available on the BNB website at This presentation is not a prospectus or any other type of disclosure document nor an offer of securities or financial products for sale or subscription in any jurisdiction. This presentation does not constitute an offer to sell, or a solicitation of an offer to buy, securities in the United States or to any U.S. person, as defined in Regulation S under the U.S. Securities Act of 1933, as amended (the U.S. Securities Act). Securities may not be offered or sold in the United States, or to or for the account of any U.S. person (as defined in Regulation S of the U.S. Securities Act), unless the securities have been registered under the U.S Securities Act or an exemption from registration is available. It is not intended to constitute financial product advice. This presentation is being supplied to you solely for your information and may not be reproduced or distributed to any other person (including any general distribution in the United States) or published, in whole or in part, for any purpose without the prior written permission of BNB. 28