Australian investment company Babcock & Brown was thrown a financial lifeline yesterday, with crditors agreing to refinance the company's debt, bringing its share price back to partial life.

Babcock & Brown was once valued around $6.5 billion, before it lost 99 per cent of its value in 2008, becoming a penny stock after being hit by the global credit crunch. The company used debt to fund its business that covered rail, toll roads, and real estate.

Last year, at their peak, Babcock's shares were valued at A$35. They revived a little yesterday, coming out of a two-week suspension, and doubled in value to A$0.48. The company spent months in negotiations with one of its main bankers over some covenants attached to around A$3 billion ($1.94 billion) in debt that will mature by 2011.

Things took a turn for the worse for the company when a smaller creditor demanded repayment. Yesterday's lifeline includes suspension of all financial covenants under Babcock's two existing corporate facilities, and includes a A$150 million facility to meet Babcock's immediate funding needs, which will be due for repayment on 31 December 2009. The company will also not pay dividends till the new facility is paid off.

The Australian alternative asset manager was earlier reported to be offloading its Enersis wind energy business in Portugal to repay debt.

Reports suggested that the value is estimated at around €1.15 billion ($1.4 billion), and that the sale is to a group of investors led by Magnum Capital. (See: Babcock & Brown sells wind energy assets in Enersis to repay debt)

The company said it would work with its bankers to towards a long-term capital restructuring that would include a possible debt-for-equity swap.

Developer Lend Lease earlier decided to cut in half the amount it was willing to pay for the group's share of retirement home business, Babcock & Brown Communities. With the bad news spreading fast, Queensland bank Suncorp-Metway also said that its provisions for bad debts would increase on account of loans to Babcock.