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The fund comprises a diversified portfolio of assets that investors canÆt typically buy and sell in listed form, split evenly between loan portfolio and securitisation assets, operating lease assets and alternative assets. This amounts to B&BÆs core business areas, so investors in the fund are in effect buying into its ability to actively manage the fund. It is also B&BÆs first listed fund to include operating leases and structured finance assets.
The loans are secured by residential and commercial properties, and the securitisation assets include intellectual property financing in the US and Europe, and inventory financing in Australia. The alternative assets comprise luxury condo financing in the US and biofuels financing in the US and Australia. The operating lease assets are made up of a portfolio of 29 commercial planes, 100% ownership of two Boeing 757-200s and a portfolio of 6,758 railcars in North America.
Capital growth aside, the fund also offers the prospect of strong dividend returns. B&B projects a payment of S$0.954 a share for 2007, which gives a 9% yield, plus S$0.52 for the period through to December 31 2006.
As the fundÆs manager, Babcock & Brown Structured Finance Management will retain a 10% stake in the fund to align its interests with those of the other shareholders. It will also take an incentive fee of 20 cents out of every dollar the fund returns above a benchmark return of 8%, plus a base fee of 1% a year on the net investment value.
The shares, which start trading in Singapore on December 20, are priced at S$1.06 and will raise S$362 million ($235 million) if the over-allotment is fully exercised. The bulk of the offer, 98% in all, will be sold to institutional investors outside the US, and the remainder went on public offer in Singapore on December 13. The offer closes on December 18.
UBS and DBS acted as joint lead underwriters. Allen & Gledhill, Allens Arthur Robinson, Linklaters, Conyers Dill & Pearman and Walkers advised B&B on legal issues relating to Singapore, Australia, England, Bermuda and the Cayman Islands, respectively. WongPartnership represented the underwriters on Singapore matters while Clifford Chance acted on English and US matters.
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