Just when Babcock and Brown and the ANZ Bank thought they had put a miserable week behind them, Friday reminded them of another unresolved problem: a new hitch at the much reduced Tricom margin lending business which both helped recapitalise earlier in the year after it got into trouble and then lost a saviour.
SAXO, the unlikely Danish bank that emerged to be the ‘white knight’ to the rescue of foundering Tricom, now looks like it is riding off into the sunset, without its prize.
That’s unless talks over the weekend can resolve what seems to have been a series of insurmountable issues: all still secret, but enough to force the situation out into public gaze late Friday afternoon.
The news came after trading finished, after Babcock & Brown had closed up 26 cents, or 11.71%, at $2.48, compared to $4.51 last Monday.
It was an upbeat ending to a week to forget, but if the Saxo doubts had been known, the bank’s shares would not finished on the up.
The ANZ rose 8 cents to $15.67 after releasing its internal report into the Opes Prime affair and how the bank managed to lend a billion dollars or thereabouts to it (and a similar amount to Tricom, at one stage!).
Now, unless Tricom’s founder, Lance Rosenberg, can whip up a third rescue — (Bell Financial Group was the first suitor to sign on, then walk after Tricom almost failed in late January), BNB faces another write-off of around $37 million.
That won’t cripple the company, but it will erode its meagre and contracting earnings stream at a time when it doesn’t want that to happen.
And, for its part, ANZ faces exposure to Tricom’s loan book, which has apparently been cut from $2.4 billion to $81 million.
Saxo popped up in May with a suggested offer of a $20 million injection into Tricom for a 35% stake and an earn-out agreement to take more equity over time.
The deal was contingent on completing due diligence and nothing much has been heard of since until the reports late Friday of the deal falling over. The sticking point, according to media reports, on who had responsibility for the bad debts in the loan book.
ANZ Chief executive Mike Smith said yesterday it would have to wait and see whether it would create an individual provision for troubled investment house Babcock and Brown
Speaking on ABC TV’s Inside Business, he declined to detail its level of exposure to BNB.
"We don’t give away our customers’ exposure," Mr Smith told ABC television, adding that the bank had not yet struck a specific provision against its exposure to B&B.
"It’s hard to see how that one will unfold but at present I think the situation with the company is still unravelling," he said.
"We’ll have to wait and see."
ANZ on Friday sacked eight staff, including the head of its institutional bank and its chief risk officer, after finishing a review of its securities lending business, which included its relationship with Opes.
Mr Smith said that the Opes Prime debacle did not indicate systemic problems at the bank.
"However, I don’t believe that there is a culture which is sufficiently robust to prevent it rehappening, so therefore there has got to be some remedial action," he said.
