Shareholders left empty-handed by Babcock sell-off deal

Struggling listed infrastructure and property asset management group Babcock & Brown has reiterated there will be no value for shareholders and little or no value for holders of the company's subordinate notes after the implementation of a mass sell-off of assets to pay down its bank debt.

The Australian company, which is also active in Europe, may also be required to delist from the stock exchange.

The bleak prognosis comes as Babcock & Brown announced it had reached agreement with its banking syndicate on a restructuring of its debt facilities and a revised business plan. One of the main features of the new plan is a 'management-controlled' sale of assets across all the asset classes covered by the company to help pay down debt.

Chairman Elizabeth Nosworthy said the sales process will be conducted in an orderly fashion over a 2-3 year horizon to avoid 'immediate forced sales of assets in the current market environment'. Surplus proceeds, excluding the amount needed to continue operating the business, will go towards paying debt.

In return the banking syndicate agreed to restructure Babcock & Brown's debt, including an A$150 mln short-term facility granted in December 2008 and the existing $2.8 bn and US$200 mln corporate facilities. The company is to pay back the A$150 mln loan plus interest on 30 September 2009. After that, the company will be required to repay $200 mln by 31 December this year; tranches of A$250 mln at end-June 2010 and again on 31 December 2010 with a payment of A$344 mln. All the payments include accrued interest.

The balance of about A$2.12 bn on the other corporate debt facilities will be repayable by mid-2018 - some nine years and six months after the restructure date - on a 'pay if you can' basis. The A$2.12 bn will not accrue interest but a 20% per annum restructuring fee will be payable on the remaining balance if and when they are repaid.

Babcock & Brown's ordinary shares have been halted for trading for two days and suspended for a further 18. The company noted that under the rules this may lead to note holders becoming entitled to request repayment. The company is considering the possibility of restructuring the notes. But if it fails to achieve this, it is likely that the group's listed entity, Babcock & Brown Limited, will be placed in administration. This would likely trigger its delisting from the Australian Stock Exchange.

In any event the management board said it did not believe the group will be in a position to resume paying dividend on its shares or interest on its subordinate notes.

Babcock & Brown was founded in 1977 and its shares peaked at A$34.78 in June 2007, giving it a market capitalisation of A$12.bn. The shares dropped 99% last year and now stand at 32.5 cents each.