chance of a bottom here, page-6

http://www.theaustralian.news.com.au/story/0,25197,23849262-30538,00.html

MARTIN COLLINS: John Durie | June 12, 2008
THE problem confronting Babcock & Brown boss Phil Green is that at some point the market loses faith and, no matter what is said, it just keeps hammering, ignoring any facts that get in the way.

Bruce Akhurst hired two consultants: Dennis Fromholzer and a sales boffin who trades under the name of Frank Mr Business Builder Rowan. Artwork: Sturt Krygsman
Hopefully, Babcock is not at this point, but the issue will be tested today when, if as expected, it issues a statement confirming the $2.7 billion refinancing for its power offshoot.

Like every other business in the west, Babcock & Brown Power will be affected by last week's explosion at the Apache plant and, like everyone else, the full extent is not yet known.

But if the market was worried, the banks would pull the refinancing. However, Babcock can put on its happy face again because it has gone back to the banks and squared it all off. That is what it will tell the market today.

The debt terms are the same, at a total average cost of 8.5 per cent, which is up on the 8.3 per cent paid before the debt was refinanced ahead of the August due date. The duration is a mixture of mainly three and five-year notes but another $360 million is due to be refinanced later.

Punters should be aware of a couple of facts that run contrary to the fear campaign doing the rounds of the bourse yesterday.

In March, Green and Co did a deal with Deutsche Bank to refinance its debt so the headstock, Babcock & Brown, has no market-based clauses on its debt. In other words BBI or BBP could fall to 2c a share and it would not trigger any margin calls on the headstock.

The best thing Green could do is come up with a new offshore deal to show the market it can worry all it likes but it is business as usual at Babcock.

Green wants to do that but it would be a stretch to say it is business as usual at a company where the stock is trading at four-year lows and has dropped a stunning $8.4 billion since June last year.

That sort of collapse is of Centro proportions, but Babcock is in way better shape than Centro was when it fell over. That is, if you base your decisions on the facts and logic and not sentiment.

That's the problem for Green because the market is trading on the latter and his connections may be good enough to get the corporate plod to do an investigation on hedge-fund trading in his shares but not good enough to wave any magic wands just now.

Broker estimates put short positions against Babcock at 15 per cent plus, putting it at the top end of the market, along with Macquarie bank and James Hardie.

Next on the ladder is Seek, Paperlinx and Fairfax Media with short sellers holding about 10 per cent of the stock.

In this sort of market, Green thought he was doing the right thing by taking his Power offshoot off the bourse pending clarification of the effect of the Apache explosion. But that simply fuelled more rumours.

Maybe today the facts might get in the way of the story.