Published on ShanghaiDaily.com (http://www.shanghaidaily.com/)
http://www.shanghaidaily.com/sp/article/2008/200806/20080613/article_362981.htm
Aussie securities firm in record plunge
Created: 2008-6-13
Author:Stuart Kelly
BABCOCK & Brown Ltd, Australia's second-biggest securities firm, plunged by a record in Sydney trading, pushing its market value to a level that may trigger a review of agreements on A$2.8 billion (US$2.6 billion) of debt.
Babcock fell 22 percent at 3:13pm yesterday, slicing the company's market value to A$2.46 billion. Creditors have the right to demand early repayment of debt should Babcock's market capitalization remain below A$2.5 billion for longer than four months, the Sydney-based company said yesterday.
Babcock has tumbled 73 percent this year, more than any Wall Street securities firm, even as it avoided the subprime mortgage losses that sank Bear Stearns Cos, Bloomberg News reported. The company, whose debt is about five times its equity, has been dragged down as the collapses of Australian firms including Allco Finance Group Ltd caused investors to shun indebted companies.
"If the review event is triggered, it will fuel even more speculation over the company's viability," said Paul Xiradis, who helps manage the equivalent of US$11 billion as chief executive officer of Ausbil Dexia Ltd in Sydney.
The review would cover A$2.8 billion of loans maturing in 2011, Babcock spokeswoman Erica Borgelt said. She added that short sellers are targeting the company. Short sellers sell shares they borrow on expectations prices will fall and they can buy them back at a profit.
"We believe the stock is being shorted, but we don't know by whom," Borgelt said. Babcock said on May 30 that it expects the full-year group profit to increase at least 17 percent to A$750 million.
Babcock fell 22 percent at 3:13pm yesterday, slicing the company's market value to A$2.46 billion. Creditors have the right to demand early repayment of debt should Babcock's market capitalization remain below A$2.5 billion for longer than four months, the Sydney-based company said yesterday.
Babcock has tumbled 73 percent this year, more than any Wall Street securities firm, even as it avoided the subprime mortgage losses that sank Bear Stearns Cos, Bloomberg News reported. The company, whose debt is about five times its equity, has been dragged down as the collapses of Australian firms including Allco Finance Group Ltd caused investors to shun indebted companies.
"If the review event is triggered, it will fuel even more speculation over the company's viability," said Paul Xiradis, who helps manage the equivalent of US$11 billion as chief executive officer of Ausbil Dexia Ltd in Sydney.
The review would cover A$2.8 billion of loans maturing in 2011, Babcock spokeswoman Erica Borgelt said. She added that short sellers are targeting the company. Short sellers sell shares they borrow on expectations prices will fall and they can buy them back at a profit.
"We believe the stock is being shorted, but we don't know by whom," Borgelt said. Babcock said on May 30 that it expects the full-year group profit to increase at least 17 percent to A$750 million.
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