=DJ UPDATE: Babcock Brown Reassures Mkt On Its Debt; Shrs Bounce12/09/2008 02:26PM AEST
(adds comment from CEO)
By Rebecca Thurlow
Of DOW JONES NEWSWIRES
SYDNEY (Dow Jones)--Babcock & Brown Ltd. (BNB.AU) said Friday it hasn't breached any covenants on its debt and no review events have been triggered, helping its share price to bounce from a record low.
"There aren't issues with the banks again," a spokeswoman said after a sharp fall in the company's share price amid concerns about its financial position.
"We have a contractual arrangement with the banks. Obviously the only time the banks can pull out of a contractual arrangement is when they have the right to review or we breach a financial covenant. And we haven't done either of those, otherwise we would have announced it to the market."
Shares in the company partially recovered on the comments. Around 0355 GMT, the shares were down 4.5% at A$1.905, after earlier being down as much as 12% at A$1.76.
Babcock & Brown has a three-year evergreen debt facility that runs until April 2011.
It was forced into talks with its lenders in June after a dramatic fall in its market capitalization gave the financiers the right to review the A$2.8 billion facility.
The firm was given a reprieve later that month when the lenders removed the market capitalization clause attached to the facility and waived their right to review Babcock's ability to repay the debt.
To secure the deal, Babcock agreed to a 50-basis-point increase under its debt facility to a 200-point margin, costing a maximum A$10 million.
It said at the time it would pay down the debt by around A$400 million through previously announced asset sales.
The 25-member banking syndicate includes Australia's big four banks - National Australia Bank Ltd. (NAB), Commonwealth Bank of Australia (CBA.AU), Westpac Banking Corp. (WBK) and Australia & New Zealand Banking Group Ltd. (ANZ). HBOS PLC's BOS International (Australia) Ltd. is the agent on the syndicate, and a large proportion of the syndicate is made up of European banks including Deutsche Bank AG (DB).
"We are compliant with all requirements under the facility. We have a good working relationship with all of our banks," Chief Executive Officer Michael Larkin told Dow Jones Newswires Friday.
"Absent an event of default or a review, the banks don't have any right to withdraw the facility."
Babcock & Brown in August announced an overhaul of its board and management and a plan to restructure its business as it reported a 30% first-half profit fall due to A$441 million in writedowns. However, it said that all financial covenants under its corporate debt facility remained covered.
"There is nothing that has changed since our results were released, so we are very comfortable with where we are," said Larkin Friday.
The management changes and restructure were a bid to address a loss of confidence in the firm after a last-minute profit warning and downward spiral in the share price.
However, the shares have continued to drop sharply in recent weeks. Larkin said margin calls have accentuated the share price rout.
"Unfortunately, there are still people who have margin loans against the stock so the share price pressure does create a momentum of its own," said Larkin. "Some margin lenders have reduced their loan-to-value ratios to zero."
The firm has made progress in its restructure plan including starting its reduction in head count, he said.
Larkin also said the firm is on track with its planned sale of European wind assets, and expects to complete the process in the third or fourth quarter.
"The potential buyers are well engaged," he said.
-By Rebecca Thurlow, Dow Jones Newswires; 61-2-8235-2959; [email protected]
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BNB
babcock & brown limited
