AUSTRALIAN INVESTMENT firm Babcock & Brown, which controls Eircom through a listed satellite fund, faced collapse yesterday after a small group of foreign creditors voted against its rescue plan, calling it an unfair deal that favoured the firm’s major bankers.
Babcock & Brown has been battling to survive for months after the global credit crunch hit its debt-funded expansion model.
After protracted negotiations with its bankers, Babcock finally agreed a debt-restructuring deal and rescue plan last month which involved asset sales and a possible debt-for-equity swap.
A meeting of New Zealand bondholders rejected Babcock Brown’s rescue plan, which would have paid them just one-tenth of a cent in every dollar, in a move that forced the company to appoint administrators, who are obliged to run the firm on behalf of the bondholders.
The vote amounted to a demand for the group’s listed parent company to repay about $117 million in bonds, pushing it into technical insolvency.
Babcock & Brown pointed out that it was now a near-empty shell and that its bondholders had no charge over the group’s physical assets, last valued at $9.1 billion, which are held by Babcock Brown International (BBI).
Babcock & Brown owns about 8 per cent of Babcock & Brown Capital Management (BCM), which is the majority shareholder in Eircom. A spokeswoman for the Irish telecoms company said yesterday’s developments had “no direct implications for Eircom”, and no impact on its day-to-day operations.
“The [BBI] management team will focus on ensuring that the value of assets and business platforms is preserved during this process and all assets and businesses continue to be managed appropriately,” the group said in a statement.
The New Zealand bondholders’ move now sets up a potential struggle between the parent firm’s administrator and BBI which is effectively under the sway of the group’s major banks.
The banks are together owed about A$3 billion in debt maturing by 2011. Like the group’s assets, BBI also holds most of the debt.
– (Additional reporting: Reuters)
