Babcock Shares Jump on Speculation of Survival Plan (Update1) Email | Print | A A A
By Malcolm Scott
Jan. 6 (Bloomberg) -- Babcock & Brown Ltd., the Australian asset manager whose stock tumbled 99 percent last year, jumped in Sydney trading on speculation it won approval from bankers for a plan to sell assets as the company struggles to avert collapse.
The shares rose 54 percent to 38.5 Australian cents at 12:20 p.m. in Sydney, taking the rally this year to 148 percent. The stock remains 99 percent below the June 2007 peak of A$34.63.
``We are unaware of any reason for the share-price gain,'' said Kelly Hibbins, a spokeswoman for Babcock & Brown in Sydney.
Babcock, which fed on cheap debt to buy property, ports and power stations, is battling to avoid the fate of companies including Allco Finance Group Ltd., the manager of infrastructure funds that imploded last year, as the global credit crisis raises debt costs and cuts asset values. Last month, Babcock got a A$150 million ($107 million) loan and the suspension of financial covenants from its bankers, giving the firm until Jan. 9 to detail a survival plan.
``We saw similar price action just before Allco Finance went out the door, so while there are punters having a go, it's still a risky bet,'' said Tim Morris, an analyst at Wise-Owl.com in Sydney. ``We have seen bankers show a little more reprieve, so maybe people are willing to take a punt that bankers are realizing that they can't just shut everyone's doors.''
Creditors Shun Liquidation
Creditors to Australian companies choking on the debts they used to expand are deciding against liquidation as the credit crisis cuts asset prices and limits the number of buyers.
Last month, lenders to Centro Properties Group decided against appointing administrators after the world's fifth-largest shopping-center owner failed to refinance A$5.1 billion of debt accumulated as it acquired 650 U.S. malls. Instead, the banks said they would take a stake of as much as 90.1 percent in Centro to pay off some of the loans.
Australia's five biggest banks have A$700 million of loans at risk with Babcock while overseas lenders including Royal Bank of Scotland Plc have almost A$2 billion on the line, according to estimates by UBS AG. Babcock had interest-bearing debt of A$9.6 billion as of Aug. 21.
Allco jumped 22 percent and 77 percent on the last two trading days in October. The company, which led a failed takeover attempt for the nation's biggest airline, handed operations to outside managers on Nov. 4 after saying it may default on debt.
To contact the reporter for this story: Malcolm Scott in Sydney [email protected]
Last Updated: January 5, 2009 20:34 EST
BNB Price at posting:
41.0¢ Sentiment: None Disclosure: Held
