is there any light at end of tunnel ??, page-16

The Age
Babcock & Brown predicts 'substantial' write-downsJanuary 7, 2009 - 6:01PM
Babcock and Brown believes its books will show a ''substantial'' negative net asset position at the end of 2008 when it reports its full year results next month.

The investment firm made the statement after the market closed on Wednesday, saying progress on the asset impairment review process for its 2008 full year accounts showed a negative net asset position would result from a reclassification of non-core assets on the balance sheet as assets available for sale.

The reclassification of the assets is in line with Babcock and Brown's revised business strategy announced to the market on November 19 and submitted to its 25-bank syndicate this week.

''The impairment process is subject to finalisation and audit review which will not be completed until closer to the scheduled release of the company's results currently expected on 26 February 2009,'' the firm said in a statement.

The banks will hand down their verdict on the revised business model next week when investors will learn if Babcock and Brown has been saved again from being placed into administration.

The firm reiterated comments that a previously flagged debt for equity swap forming part of the capital restructuring of the firm will significantly reduce the value of any existing equity.

But on Wednesday it went further, saying any capital restructure is also expected to ''significantly dilute existing shareholders, negatively impacting the value of equity''.

Babcock and Brown's revised business plan is expected to detail how it will repay a $150 million loan secured on December 5 and restructure its balance sheet.

Financial conditions on Babcock and Brown's corporate debt of $2.8 billion and $6.4 billion of limited recourse debt on the firm's balance sheet have been suspended until Friday.

The firm escaped administration in December, winning a reprieve from its bankers in order to sell its assets to pay down the debt.

Investors sold off the firm's securities on Wednesday, leaving them six cents, or 15.5% weaker at 32.5 cents.

This followed Tuesday's 54% surge on short covering and speculation a revised business model was already in the hands of its bankers.

AAP