bnb considers cash injection

B&B considers cash injection



* Danny John
* October 24, 2008

BABCOCK & BROWN is considering at least six potential offers to inject much-needed capital into the troubled group from a range of investors including specialist fund managers, but any deal is unlikely to come to fruition before the new year, the company revealed yesterday.

The group has received numerous unsolicited offers proposing to either buy into the business, team up with it as a new major shareholder or work alongside its listed offshoots, since the radical overhaul it announced in August that precipitated the departure of its top two executives, Jim Babcock and Phil Green.

The line-up of potential investors includes a private equity operator and investment groups keen to make the most of B&B's directly owned assets, including its wind, transport and energy operations, or the businesses run by its managed funds, including B&B Infrastructure and B&B Power.

About six serious options are being considered by B&B and its advisers as part of the blueprint that will govern the group's future following the strategic review being pushed through by the new chief executive, Michael Larkin.

B&B said yesterday that any one of the proposals could lead to a "strategic relationship" being formed with it. However, it gave little detail on the shape of the would-be alliances and described the current process as being at a "preliminary stage".

The company also said there was no guarantee any solid offer would emerge and it would take time to work through the details. "As the process has only recently commenced, no formal timetable for resolution of any agreement has yet been determined, although B&B would expect it to continue into the new year," it told the ASX in a statement.

The announcement saw B&B's shares rise 17c, or 12 per cent, to $1.57 as buyers took hope that the group's recapitalisation plan was slowly taking shape.

Sources indicated that the next two to three months would allow the group to "weed out" the least attractive approaches which would then see the over-arching plan presented to the board for it to decide the best way forward.

While B&B is under no pressing need to refinance its debt burden, which has been one of the primary causes of the slump in its sharemarket value this year, a cash injection would both help to underpin investors' faith in the group and tide it over as it faces increasing difficulties selling assets.

Yesterday's disclosures came just as B&B has agreed on new working relationships with its two main listed funds, which will see it loosen its management and board control of them as well as taking heavily reduced fees for the work it does for them.

That has also given them more freedom to decide their own futures, a move that coincided with a declaration from the debt-stricken energy producer Babcock & Brown Power two days ago that it was open to takeover bids or a break-up of its power assets.

The Sydney Morning Herald