B&B's EUR 1.15bn deal leaves investors unmoved

Sydney-listed infrastructure and property asset manager Babcock & Brown announced a EUR 1.5 bn asset sell-off on Monday as investors concerned about the viability of the debt-laden company pushed its share price to a record low.

Babcock + Brown said that it is selling the Enersis portfolio of wind farms in Portugal to a consortium of investors led by Magnum Capital for EUR 1.15 bn to help reduce its AUD$9.6 bn (almost EUR 5 bn) of debt.

The Australian company said the AUD$285.82 mln in net proceeds from the sale of the portfolio owned in a 50/50 joint venture with Babcock & Brown Wind Partners would be used to pay debt secured against European wind assets. Babcock & Brown made a AUD$11.7 mln loss on the deal. Nevertheless it plans to sell its remaining stakes in wind assets in Portugal, France, Germany and Greece.

The news of the Portuguese deal did not stir the market as it coincided with the group's warning that its joint venture with Australian listed property trust GPT faced a potential loss of AUD $82 mln (EUR 65 mln). US bank Wachovia has issued a notice of acceleration in relation to a debt facility provided to the Babcock-GPT special purpose vehicle, HTM Fund 1 Subsidiary A LLC (HTM), which holds US loan asset investments.

Babcock & Brown said that discussions between the parties are ongoing, but if these talks are not resolved satisfactorily the joint venture could suffer a loss upon the liquidation of the assets that underpin the loan.

The Australian asset manager has seen its share shed half its value since 6 November and the company is selling assets in a bid to stabilise its position. The share price has declined by 98% in the last year from AUD$27, and was as low as AUD$0.36 on Monday before limping back to AUD$0.48.