smh, page-3

See Nine MSM and of interest Aegis (I presume it was misspealt) referring to NTA of $3 - 4 per share.


Babcock & Brown Ltd (B&B) has been given expensive breathing space by its banks through $150 million in extra funding and extensions to its interest payments, causing its shares to surge in value.

The conditions attached to the new funding facility mean B&B will pay close to credit card rates of interest as it comes up with a restructuring proposal in the next three months that satisfies its lenders.

The plan will probably involve giving them a stake in the company in exchange for debt relief.

The investment firm, whose market value has fallen to $153 million from a peak of almost $13 billion last year, plans to use the extra time to sell progress an assets sale program at better prices to reduce a total of about $3 billion of debt, while becoming a smaller company focused on infrastructure investment.

"We appreciate the support of our banking syndicate who have moved quickly to provide measures to address some of the immediate funding requirements within the business and provide a structure for ongoing discussions around the long term positioning of the business," B&B chief executive Michael Larkin said.

"We remain focused on reducing debt levels while managing the business to meet our obligations and preserving the value of our assets and funds management platform."

B&B stock was up 16 cents, or 64 per cent, to 41 cents at 1555 AEDT, and off a day high of 57 cents.

The company also said it would not be paying any dividends until it repays the new loan, which matures December 31, 2009 and any accrued interest on existing debt.

Aequs Securities institutional dealer Ric Klusman said investors bought the stock as they were reassured by the banks' willingness to extend credit.

"The banks have a vested interest to keep them alive, and they believe they do have the assets there to support it, provided they can liquidate at an adequate time and price," Mr Klusman said.

B&B's net tangible asset value was probably between three and four dollars a share, he said.

The shares were suspended from trading on November 20 as Sydney-based B&B sought an agreement with its lenders after an unnamed bank, believed to be Germany's Hypo Vereinsbank (HVB), froze a deposit worth up to $140 million held on behalf of B&B against debt owing.

B&B said on Thursday it had come to an arrangement with that bank.

Under the new agreement, B&B will receive the $150 in new debt to cover its immediate funding requirements, including certain development projects in North America.

Interest on the facility will 10.6 per cent or six percentage points more than the 30-day bank bill rate, which was 4.6 per cent on Thursday, and B&B will have to repay the new debt ahead of existing loans. Some low interest credit cards charge interest of around 12 per cent.

B&B will be allowed to repay the interest on the new loan and existing debt on a "pay if you can" basis, and debt covenants on the existing borrowings have been suspended.

The company will need to propose a longer term capital restructure that satisfies its lenders by February 28, and which is expected to include a debt for equity swap. Any proposal has to be implemented by April 30.

The firm must also have in place a business plan by January 9 to show how it will repay the new loan and get its balance sheet healthy.

The plan will be similar to that proposed on November 19, when B&B said it would keep its infrastructure business while selling off the other divisions, including real estate and operating leasing.

B&B expects the plans will enable it to repay more than half the $3 billion in debt by 2011.

Interest on the existing New Zealand and Australian subordinated notes will not be payable until the new facility is repaid, but will accrue further interest at a penalty rate of an extra two percentage points if not paid on time.

Interest on the $415.8 million of Australian notes is due on May 15 and the rate is 6.38 per cent. The interest rate on the $NZ225 million ($A185.3 million) of New Zealand notes is 9.01 per cent it is payable on March 15.