Babcock Requests Trading Halt As Lenders Withhold Money

The Age

Friday November 21, 2008

Mathew Murphy, Infrastructure Reporter

THINGS have gone from bad to worse for besieged investment group Babcock & Brown with the company in a trading halt after revealing it is in dispute with one of its lenders.

A day after announcing a major restructuring plan in a bid to remain afloat, Babcock released a statement to the Australian Securities Exchange requesting a trading halt.

"We are in dispute with a bank which holds a deposit of a material amount relating to the release of that deposit," the company said. "It is expected that the trading halt will end upon resolution of that dispute."

Babcock refused to reveal how much the "material amount" of money was, why it was being withheld or if the dispute involved one of the 25-bank consortium with which it has a corporate debt facility of $3.1 billion. Babcock has been granted a trading halt until Monday morning, by which point it expects to be able to provide some clarity.

If the dispute is with one of the banking syndicate, it does not bode well for Babcock's mercy plea issued on Wednesday. Babcock said the market conditions meant it would find it "difficult" to meet the conditions attached to the corporate debt facility and that its major restructuring, including the sale of half the company, would only pay half of the $3.1billion it owes.

In a bid to appease bankers and investors, Babcock said it would slash 850 jobs by 2010 and sell its real estate and leasing businesses "when opportunities arise". If it manages to sell those assets, which analysts and ratings agencies have expressed serious doubts about, it would leave Babcock with just the infrastructure part of the company.

Any restriction on Babcock's access to funds or moves that would put it offside with its banking syndicate could prove dire for the company, which is on the brink of collapse.

Babcock's shares did not trade yesterday, but the stock has lost more than 99% of its value, falling from a high of $34.63 in June last year to its current 25.

Merrill Lynch took its rating off the company's shares, saying that risks were high and there was "significant uncertainty" around Babcock's negotiations with the banks.

Standard & Poor's also lowered its rating on Babcock and said it faced "significant challenges" in selling assets.

Babcock said talks were continuing yesterday with the banking syndicate. Babcock's market capitalisation is now just under $92 million.

© 2008 The Age

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