Babcock & Brown Capital (BCM) said today the review of the debt agreements by its parent Babcock & Brown Ltd does not affect the telecoms company or the Golden Pages which it also owns.
Babcock & Brown Ltd saw its share price tumble send its company's market capitalisation below a level set by its lenders that would trigger a review of its debt agreements, sparking concern that Babcock may become the latest Australian victim of the global credit crunch.
Babcock & Brown Ltd lost a third of its value today as investor concerns mounted about the company's debt and ability to raise funds, taking losses to over 50 per cent in two days.
Babcock has said that reaching the review limit does not mean it would have to repay or speed up repayment of its roughly A$2.8 billion (€1.7 billion) in debt, due by 2011.
But analysts said investors are still concerned about the future of the company if it is starved of cash. In a statement this morning BCM said it has "no cross shareholding or loans with Babcock & Brown Ltd or any of its funds".
"Both Eircom and Golden Pages have long dated debt profiles which are non-recourse to BCM and have no conditions relating to the financial position of Babcock & Brown Limited or its roll as manager of BCM. Eircom and Golden Pages continue to meet all their required debt covenants", the BCM said.
"BCM remains in a strong cash position with approximately A$240 million (€145 million) available in cash which has been allocated to capital management programs and a further A$150 million (€91 million) cash reserve to support current investments.
"BCM's cash is held on hand or in short-term deposits of no greater than 90 days with quality rated Australian financial institutions."
In a report this morning UBS said in a report that a break-up or a management buyout could not be ruled out.
"This would enable a purchaser to acquire the embedded value in much of its development pipeline as well as a high quality staff base," UBS said. Analysts said Babcock could accelerate its sales of wind power farms in Europe or other such assets to repay debt.
Under its business model, Babcock buys infrastructure assets, such as ports and power plants, and bundles them into listed and unlisted funds to earn management fees.
The model, also used by bigger rival Macquarie Group Ltd, is heavily reliant on debt funding to buy assets and boost revenues.
Credit Suisse estimates the total debt within Babcock and managed funds at A$46 billion (€28 million).
Additional reporting Reuters
