Hats off to the Babcock and Brown spinners for being able to paint a sale-of-assets-to-reduce-debt as a sale-of-assets-to-show-our-valuations-aren’t-dodgy, but I’m not quite sure which take is less favourable.

Perhaps the “don’t call us financial engineers” at BNB were emboldened by the general lack of scepticism about their accounts last week, encouraging them to take their financial protractors and set squares to two members of their empire. Michael West nails Babcock and Brown Capital’s Irish shenanigans in Fairfax’s Business Day, but the announcement by BNB and Babcock and Brown Wind that they’re trying to sell some wind farms seems to have been universally taken at face value.

What it boils down to is BNB and BBW saying it’s a terrible thing that the market doesn’t believe the valuations they have on their European wind farms, so they’re going to try to flog some of them just to prove they’re right – oh, and it would allow both companies to pay down some debt. And maybe buy something that would add value. Yeah, maybe.

Meanwhile Babcock and Brown Capital seems to be saying that, having raised a whole pile of capital from shareholders, they can’t find anything to do with it so they’ll return it via a buyback of 50% of the company. That’s a very serious buyback in anybody’s book.

But please don’t call these fellas financial engineers.

It’s the BBW story that intrigues me most as it could set a wonderful precedent for the broader market in these troubled times. There are more than a few companies trading at a discount to net assets – ABC Learning, for example, if you treat all that goodwill as an asset, or any number of property trusts and such.

So maybe all of them should hang out “for sale” signs and that will put the market’s collective mind at ease. Or maybe not.

I’m wondering if BNB might like to put up for sale the American flats they’ve revalued upwards by $100 million just to prove those valuations are rock solid despite everything you read about US residential real estate. But again, maybe not.

Peter Fray

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