Babcock & Brown International Pty Ltd (BBIPL) was the original project sponsor of CHP's successful bid for the new RCH project and was the original owner of the equity investment in the project. CHP is the project company and the entity that has contracted with the state to deliver the project.
The project funding was provided to the project company by a combination of subscriptions for units in the CHP Unit Trust, of which the project company is the trustee, and loans from other companies within the project funding structure, where the money lent by those companies was in turn financed through unit subscriptions and the proceeds of three bond issues.
The Babcock & Brown group has been adversely affected by the recent downturn in international financial markets. The state obtained legal advice in late 2008 and early 2009 indicating that:
• all debt and equity funding for the project was paid to the project company on 27 November 2007
• Babcock & Brown International Pty Ltd (BBIPL)-the original project sponsor- and Babcock & Brown Public Partnerships (BBPP)-the subsequent sponsor after a change in control was approved by the Minister in 2008-were the underwriters of the equity requirement for CHP. Neither party has any on-going obligation to provide funding to the project, so accordingly there is no risk that funding already paid can be recovered.
The legal advice concluded that the project's construction costs are fully funded and that the state is a secure credit risk in terms of meeting future quarterly service payments once the hospital is completed and operating.
Babcock & Brown Limited (the Australian listed entity) is currently in voluntary administration while BBIPL (the ultimate parent company) continues to trade.