Babcock & Brown Share Prices Record Gain

Submitted by Craig Strzelecki on 18 June, 2008 - 10:25

Australia's biggest electricity producer gained considerably at the Sydney stock exchange after it announced its refinancing achievements. Babcock and Brown today announced that it has managed to refinance it’s a$ 2.7 billion debt which led to increased investor confidence which made the share prices advance 16 percent or 12 cents to 85 cents. It has been its highest gain since June 12.

Investors and the market had been sceptical since past one week about the refinancing capabilities of Babcock Power and may lead to shut down of the company's Western Australian retailing unit. This scepticism has led to a fall of 46percent in the Babcock shares. US based fund manager Fidelity revealed that it had sold 5.3 million shares of B&B Infrastructure on Thursday when the prices fell by 28 percent and on Friday when the prices went down by 24 percent. British fund manager Barclays had sold its stakes earlier on June 6 to fall below 5 percent stake in the company. Fidelity became the second international investor to fall below that level after selling its stakes in Babcock and Brown.

However, Babcock's Chief Executive, Phil Green, has managed to regain the investor confidence after his meeting with the bankers on Monday night. The share prices rallied 68 cents to A$5.93.

BNB Power shall be heading towards a complete sale of some of its power plants to raise yet another A$360 million in corporate debt. Its share prices had fallen too along with the parent Babcock and Brown Ltd. The Babcock's bankers would take another week to take a formal review the A$2.8 billion senior debt facility. The share prices are still well below the $7.50 mark which may push the market capitalisation trigger and call for a complete bank review from the consortium of all 25 banks. s

The upcoming weeks still remain crucial for Babcock Power as its 13.1 percent dividend remains "at risk" if the funding is not completed and the sales do not deliver the estimated cash. B&B also announced it also plans to conclude the sales of its wind farm assets by early October that are nearly worth $2 billion.

According to the Deutsche Bank, the company would be able to negotiate well with the bankers due to its asset sales. As the equity market has been seeing a downslide since past few weeks and there has been a scarcity of availability of cash reserves to service the debts, asset sales is the only feasible option for the company.