| Babcock & Brown’s business knows no boundaries |
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| As a division of the international investment banking and asset management firm, Babcock & Brown’s Dublin operation focuses on cross-border financing for aircraft, rail, power and other assets as well as project finance writes COLM BARRINGTON. |
Babcock & Brown is an independent international investment banking firm specialising in arranging domestic and cross-border leasing, infrastructure development and project, property, corporate and structured finance. Babcock & Brown also provides asset management services for its clients, mainly in aviation and rail. The company is recognised as a world leader in acquiring, managing, structuring and arranging financing for a target spectrum of diverse ‘big ticket’ assets such as aircraft, ships, power stations, rail and satellites.
Founded in 1977, Babcock & Brown is 20 per cent owned by HypoVereinsbank (HvB), Germany’s second largest bank. Babcock & Brown’s staff owns the remaining 80 per cent. The relationship with HvB provides Babcock & Brown with access to German, Austrian and other European markets and the availability of capital and other support for strategic investments and initiatives.
Since the firm was established, Babcock & Brown has arranged over $250 billion of innovative financings for a broad range of the world’s corporate and government bodies. In 2002, the company arranged more than $22 billion of total financing.
The company currently employs approximately 500 staff in 22 offices in the major financial centres of North America, Europe, Africa, Asia and Australia. Its integrated international nature allows it to draw on experience and expertise from its offices around the world to bring innovative solutions to each of its clients. One of Babcock & Brown’s key strengths is the range of experience of its staff, which include finance specialists, tax and corporate lawyers, engineers, accountants, mathematicians and programmers.
Japanese leasing
In 1986, Babcock & Brown and The Nomura Securities Co., Ltd. established a joint-venture company, Nomura Babcock & Brown (NBB), to develop lease products to finance assets around the world and to provide Japanese investors with attractive investment opportunities.
The extensive taxation, legal and accounting expertise available to this joint venture has facilitated the creation of products for the specific needs of investor and lessee clients.
These products include the Japanese Leveraged Lease (JLL), the Japanese Operating Lease (JOL) and Japanese Operating Lease with Call Option (JALCO). Over the past 16 years the combination of Nomura’s equity placement skills and Babcock & Brown’s structuring, marketing and transaction arrangement skills have proved to be very powerful.
Recently, Asset Finance International recognised Babcock & Brown and NBB as the market leaders in Japanese syndicated aircraft lease financings.
‘Babcock & Brown aims to maintain its leadership position in its traditional competencies, while expanding its reach into related areas.’
Babcock & Brown has long held a dominant position in arranging different forms of leases for the airline industry. The company has been at the cutting edge of technology, adapting to changes in taxation and regulatory environments and often pioneering innovative structures which have later become market standards. Babcock & Brown typically acts as the arranger of the transaction, as well as an advisor to lessees or lessors. In these capacities the company is responsible for product development, debt and equity raising, financial analysis, co-ordination of documentation and ongoing transaction management.
In March 1994, Babcock & Brown Limited was established in Dublin to capitalise on the experience and expertise available in Ireland, specifically in the areas of aircraft operating leasing, cross-border leasing, debt structuring and asset management. The founding directors of Babcock & Brown Limited had previously held senior positions in both GPA Group plc and GE Capital Aviation Services.
Babcock & Brown Limited currently employs ten professional staff in its Dublin office, which is located in the West Pier Business Campus in Dun Laoghaire. The company’s Dublin based staff are involved in the arrangement of cross-border finance and operating leases for aircraft, rail, power and other assets. They also provide asset management services for aircraft on operating lease. These asset management services include contract compliance, provision of financial and management information, review of aircraft maintenance, management of aircraft deliveries and redeliveries and management of aircraft modifications.
These functional capabilities, coupled with expertise in aircraft lease marketing and aircraft sales, allows Babcock & Brown Limited to provide a broad range of aircraft and lease management services to a range of aircraft owners.
Babcock & Brown’s Dublin office also specialises in the arrangement of cross border Swedish leases, primarily for aviation, power and rail assets. As an example, in December 2002, the company completed a $120 million Swedish lease of subway trains into Australia. For this particular deal, Babcock & Brown used its extensive international network of client relationships to bring together a Swedish bank with the State Rail Authority of New South Wales.
Babcock & Brown’s project finance team has also recently been active in Ireland. The project finance business began in the U.S. in 1986 with a focus on equity placement and structuring for independent power projects. Since then the group’s business focus has expanded to include not just power, but also telecom, industrial and transportation facilities, as well as government privatisation related projects.
The company typically acts as an advisor to the developer or project sponsor, or as a developer or co-sponsor in its own right. Babcock & Brown differentiates itself by providing a range of specialist services, including quantitative analysis, design and negotiation of contractual arrangements, delivering optimal tax treatments and structuring and placing private equity investments to fund all phases of a project.
Babcock & Brown’s expertise in power projects will allow it to capitalise on the recent trend towards privatisation and deregulation in Ireland. In February 2003, the company announced the acquisition of the Ireland Power project from BP. The purchase of Ireland Power is in anticipation of the Commission for Energy Regulation (CER) completing a process by which it will be possible to finance the building of a 400 megawatt power plant at Mulhuddart in west Dublin. Babcock & Brown is currently seeking clarification from the CER about the process for contracts to sell the plant’s output to the ESB.
Going forward, Babcock & Brown aims to maintain its leadership position in its traditional competencies, while expanding its reach into related areas. The company has been successful in its first 25 years by creating, on a rolling basis, significant new and innovative revenue sources. These leave it well placed to enjoy continued success in the future. |
Colm Barrington is managing director of Babcock & Brown.
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