Shares in the Australian investment bank Babcock & Brown, which controls Eircom through its subsidiary Babcock & Brown Capital, fell today after the appointment of a new chief executive officer failed to convince investors the company can be saved as it sells assets at a loss to reduce debt.
Chief financial officer Michael Larkin will replace Phil Green (53) after the Australian infrastructure manager posted its first drop in profit, Sydney-based Babcock said in a statement today.
Jim Babcock (63) who founded the company in 1977, stepped down as executive chairman.
“Babcock's problems go way beyond management, so I'm not sure what they want to achieve by removing the top guys,'' said Angus Gluskie, who helps oversee $500 million at White Funds Management in Sydney.
“It's the business model that's come under fire, so changing the guard has only destabilized the market. An external appointment would have been better if they wanted to restore confidence.''
Babcock's shares have plunged 90 per cent since the global credit markets seized up a year ago, cutting off access to cheap loans to finance acquisitions of ports, power stations and airports, which it bundled into funds it manages.
It is now being forced to sell some assets at a loss to reduce debt after bankers raised interest rates following the share-price slump.
Babcock tumbled 36 per cent to a record low $2.22 at the close in Sydney, the biggest drop since the company listed in October 2004.
Its market value of A$740 million (€440 million) compares with the A$8.9 billion (€5.3 billion) at the beginning of the year.
Almost 60 per cent of the company's market value has been wiped out in the past two trading days as media speculation about a new chief executive prompted Babcock to ask for a suspension of its shares on August 19th after the market closed.
Babcock, the worst-performing stock on the MSCI Asia- Pacific Index this year, said net income in the six months ended June 30th fell 24 per cent to A$150.9 million as the value of its listed funds slumped.
It posted A$441 million of writedowns in the half as its listed funds dropped and banks pressured the company to sell assets.
Mr Larkin said today he will trim debt and reduce risk, close smaller offices and fire 25 per cent of workers to cut costs by 20 per cent.
“For our shareholders we would like to think that some of the measures today, and the clear direction we are taking, should be the first step down the path of restoring some confidence,'' he said.
Bloomberg