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Freehills helps Babcock & Brown Japan break free

Freehills helps Babcock & Brown Japan break free

Freehills has advised the Babcock & Brown Japan Property Trust (ASX: BJT) on its recent deal to break free from Babcock & Brown. The deal also involved internalising trust management…

Freehills has advised the Babcock & Brown Japan Property Trust (ASX: BJT) on its recent deal to break free from Babcock & Brown. The deal also involved internalising trust management rights, and entering into arrangements with the Japanese asset manager.

The Babcock & Brown Japan Property Trust holds interests in ¥157.8 billion ($2.3 billion) of property assets in Japan.

The internalisation was successfully settled on 16 April, and is expected to bring substantial fee reductions to incentivise and retain Japanese management.

Lead partner Justin O'Farrell said the deal was complex and required a dynamic approach from the Freehills legal team, which also included partner Damien Hazard and senior associate Rob Bileckij.

"As with many deals into Japan, there was no shortage of complexity," O'Farrell said.

"Workarounds and multiple solutions were the order of the day, as we wrestled to put in place a structure that would satisfy the board's commercial requirements in Australia against the complex and often uncertain requirements of Japanese tax and legal regulation".

"The transaction also featured innovative economic stapling arrangements developed by Freehills to achieve deal certainty in the shortest possible time against the backdrop of developments unfolding for the wider Babcocks group."

O'Farrell, who recently led the deal for the recapitalisation of Abacus through a cornerstone investment and follow-up low-doc rights offering, said more deals of this variety were likely in the current market.

"It is likely that the current economic environment will see an increasing need for reorganisations of property trusts. Innovative solutions will be needed to address debt covenant issues brought on by upcoming property devaluations and swap accounting treatments. We are currently advising other trusts on these issues."

The Freehills team worked closely with Rohan Purdy, Babcock & Brown Japan Property Trust in-house counsel, to finalise the transaction.

UBS (Darren Rehn and Russell Cowley) were the financial advisers to the board, with PwC (Manuel Makas and Marc Lim) providing tax advice in Australia and Japan. Nagashima Ohno & Tsunematsu were the Japanese legal advisers.

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