Babcock Brown puts half its asset base up for sale

AUSTRALIAN INVESTMENT firm Babcock Brown, which has a stake in the fund that owns Eircom, put about half its asset base up for sale yesterday, announced sweeping job cuts and sought to renegotiate its bank debts to safeguard its future.

The listed group is trapped between tumbling asset values and a need to repay around A$3 billion (€1.54 billion) in debt over the next three years.

The group's share price has fallen by 99 per cent so far this year.

Yesterday it said it would be difficult to meet existing debt facilities in the near term given the meltdown in markets.

"Discussions with the banks regarding these changes are ongoing and may not be concluded before the end of December this year," the group said.

"The announcement does not have a direct impact on us," a spokesman for Eircom said.

Eircom is owned by Babcock Brown Capital (BCM) which is separately listed on the Australian exchange.

Babcock owns approximately 7 per cent of BCM and provides finance advice and also has a valuable management contract with BCM.

BCM owns Eircom and the Golden Pages franchise in Israel, and has cash reserves of approximately A$300 million.

"I don't think this changes the situation as far as BCM is concerned at all," a spokesman for Babcock said.

However, the two Australian firms are currently negotiating the potential sale of the management contract by Babcock to BCM and in such an instance, the spokesman said, Babcock might sell its stake in BCM.

Babcock Brown plans to refocus entirely on its infrastructure business, putting the for-sale sign over its remaining businesses of real estate, leasing and corporate and structured finance in the worst market environment for decades.

Its stake in BCM would not be considered an infrastructure investment, the spokesman said.

The non-infrastructure businesses account for just more than 50 per cent of the group's book assets, according to its balance sheet as of June 30th, though infrastructure now accounts for the vast majority of Babcock Brown's revenues.

"I can't imagine the asset sale process will be as quick as the banks want it and BB can't sell those assets quick enough either," said a hedge fund investor who asked not to be named.

"So either there is an asset sale or huge trouble with banks owning a lot of infrastructure assets," the source said.

The group said it would shed more staff and more than halve operating costs by 2010.

It said it aimed to shed about 60 per cent of its workforce, bringing staff down to 600 during 2010 from 1,450 now. - (Additional reporting: Reuters)