'Babcock was not high risk'

Former Babcock & Brown chief executive Phil Green says he didn't see his company's business model as high risk, months before the investment firm failed because of mounting debt.

An examination into the failed investment bank by its liquidators began in the Federal Court in Sydney yesterday.

Babcock & Brown entered administration in March 2009 amid losses of more than A$5 billion, a dramatic fall from its height in mid-2007 when it was worth A$13.2 billion ($16.2 billion).

Nicknamed "mini-Macquarie", it had borrowed heavily to buy infrastructure and property assets to on-sell to third-party investors in funds it managed for a fee.

Mr Green faced questioning by barrister Peter Wood, SC, for Deloitte partners David Lombe and Simon Cathro.

Mr Green was asked if his February 2008 guidance for annual profit of at least A$750 million in calendar 2008, up 15 per cent from the previous year, was "wildly optimistic".

"No, I do not agree," Mr Green replied.

At that point the company's investments were in relatively defensive assets, and it had funds worth about A$4 billion in unlisted infrastructure funds, he said.

"In that context I believed that we were well positioned and the risk to our balance sheet was relatively low," Mr Green said.

Months later, amid a falling share price, Babcock & Brown's head of global infrastructure Peter Hofbauer emailed senior executives to express concerns the company had lost credibility with its stakeholders, the court was told.

The hearing continues.

- AAP