Babcock & Brown to sell assets, faces delisting

07 February 2009

Under pressure from its creditors, troubled Australian investment group Babcock & Brown Ltd has agreed on a debt restructuring deal and a revised business plan which will force it to sell all its assets to repay debt, wiping out shareholders. However, this may not be enough to save it from being delisted by the stock exchange.

The group said on Friday that it will restructure existing debt facilities on a "pay if you can" basis, and plans to sell more assets over two to three years to raise cash. But it warned investors that under the plan, there would be no value left for its equity holders and no or negligible value for holders of its subordinated notes.

Babcock said it would not be able to resume paying interest on the subordinated notes, or to pay dividends on its shares. Under the terms of the notes, the company faces delisting if its shares remain suspended for 20 consecutive business days, it said, adding it was still considering its position regarding noteholders. Trading in Babcock's shares has been suspended since 8 January.

Chief executive officer Michael Larkin will lead the sale process and hand the proceeds to banks over the next two to three years. Under the new plan, the company will repay a short term facility of A$150 million by 30 September. It will also repay A$200 million of other debt by 31 December, A$250 million by 30 June 2010, A$250 million by 31 December 31 2010 and A$344 million by April 2011.

The remaining balance of approximately A$2.12 billion on the other corporate debt facilities will be repayable nine years and six months after the restructure date, or mid 2018, but only to the extent of realization of assets, it said. It has also restarted a redundancy programme which started in the second half of 2008.

Babcock's holdings "across all asset classes" will be sold, with all proceeds over the amount needed to continue operating the business used to reduce debt, the company said. The group, whose liabilities exceeded its assets at the end of last year, has been talking to banks about its plans to repay an additional short-term A$150 million lifeline granted in December.