B&B offers apology

BABCOCK & Brown yesterday offered commiserations to investors in its underperforming listed funds and significantly reduced its gearing levels.
At a marathon annual general meeting in Sydney it also flagged a review of its investment strategy that could see small funds privatised.

Sympathy was also offered to investors in the mothership, Babcock & Brown, which has lost 64 per cent of its market value since May last year.

"All of us at Babcock & Brown are very much aware that loyal Babcock & Brown shareholders have suffered material financial hardship as a result of this decline in share prices,'' chairman Jim Babcock said.

Like Macquarie Group, Babcock uses lots of debt to buy infrastructure and property assets, then sells them into listed and unlisted funds, from which it collects management fees.

The investment house yesterday reiterated its earnings guidance of growing profits by 15 per cent to at least $750 million in the 2008 calendar year.

"The acquisition of assets has slowed down and we expect that to continue, probably to the fourth quarter,'' chief executive Phil Green said after the meeting.
Babcock's shares have fallen on concerns that it will not be able to keep funding the asset acquisitions that fuel its profit growth with debt in hostile credit markets.

Mr Green said Babcock had refinanced about $2.8 billion of debt with an extended maturity date to April 2011.

He also told shareholders the company had reduced its ``look-through'' gearing ratio to 66 per cent from 75 per cent.

But the reduction wasn't enough to appease the Australian Shareholders Association. ``I find those figures rather frightening,'' ASA representative Roy Cook said.

Shareholder activist Stephen Mayne said he thought Babcock's model of raising cash from third-party investors was broken and asked management to move towards an internally managed model. "I think we need to bite the bullet and wake up to the fundamental reality that there's been a loss of confidence in the model,'' Mr Mayne told shareholders.

While Babcock accepted it had grown one of its listed funds, Babcock & Brown Power, too quickly, Mr Green said the idea of externally managed funds was not broken because the group, along with Macquarie, was still raising billions of dollars.

Mr Green said management would review the investment strategy of all of its listed funds over the next six months with a view to bringing their market value closer to the value of their underlying assets.

Babcock shares added 20 to $12.46, BBP 6.5 to $1.335 and BBW 5 to $1.70 but BBI lost 0.5 to $1.045.

Copyright © 2024 The Mayne Report. All rights reserved

• share
  Share
  • 
    Facebook
  • 
    Twitter
  • email
    Email
  • print
    Print
  • link
    Copy Link
  • cancel
    Cancel