Australian brokerage refinances its debt

By Stuart Kelly  |   2008-7-1  |     NEWSPAPER EDITION

BABCOCK & Brown Ltd, Australia's second-biggest securities firm, agreed to a higher interest rate on A$2.8 billion (US$2.7 billion) of debt as banks waived their right to force early repayment.

Bank of Scotland Plc and a syndicate of 25 banks also canceled a clause in lending agreements requiring the Sydney-based company's market value to remain above the A$2.5-billion level it plunged through this month, Babcock said yesterday.

The shares jumped 18 percent after Chief Executive Officer Phil Green said he'll appoint advisers to help with assets sales to cut debt. The global credit seizure has brought into question his strategy of borrowing to buy utilities such as wind farms and bundling them into funds, said Bloomberg News.

"This may instill a bit more confidence in the company," said Sean Fenton, who manages the equivalent of US$700 million at Tribeca Investment Partners in Sydney. "They're still operating in an environment of tight credit, soaring inflation and depressed asset prices. Babcock needs to get some good assets sales under way and repay debt."

The stock rose A$1.14 to A$7.50 at the close in Sydney, raising the company's market value to within A$25 million of the A$2.5 billion level.

Babcock shares, sold for A$5 apiece in an initial public offering in October 2004, have fallen from a A$34.78 peak in June 2007.