Australia, Banking, Capital Markets, Funds Management, Infrastructure - Tuesday, July 1, 2008 11:38 - 0 Comments

Babcock & Brown faces up to leaner times

Euromoney magazine, July 2008

This time last year, Phil Green had plenty to smile about. The chief executive of Babcock & Brown, Australia’s newest and fastest-growing investment bank, was preparing to announce a 53% increase in interim group net profit year on year, with 44% growth in earnings per share. B&B’s landmark bid for the Alinta energy group, in partnership with Singapore Power, was on its way to completion; the share price was flying high at almost $35.

What a difference a year makes. On June 13 this year, the share price hit a low of $4.70 – a more than 80% drop since last July. Investors have fled over concerns about the bank’s debt load, and when their flight breached a threshold in market capitalisation, a covenant was triggered allowing a consortium of lending banks to review a $2.8 billion debt facility (which, in turn, set off further share price falls). Since then, the bank has suspended distributions in some of its listed infrastructure funds, spurring further alarm. These days Green is spending much of his time trying to reassure the market that the whole thing isn’t going to keel over. Continue…

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