Babcock & Brown briefly looked over the cliff this morning as its shares plunged another $1.06 or 7.6% to touch a low of $12.90 in early trading.
However, pugnacious CEO Phil Green is continuing his strategy of detailed and regular announcements and the stock recovered to be only 7c weaker for the day by midday.
At 2.29pm on Friday, Babcock came out with this statement responding to rumours about big margin loans over its investments in various funds.
As if to confirm it is business as usual, Babcock today painted a contrast with the imploding Allco group by also announcing a $US250 million aircraft financing deal in Germany and confirming the stakes picked up last week in the debt-laden Rubicon property trusts.
However, it was this statement announcing that $250 million of margin loans against investments in the various listed funds had been paid down which was supposed to fully restore confidence. However, it only really brought an uneasy truce because Babcock has largely achieved this by increasing its corporate banking facilities.
Like Macquarie and Allco, Babcock doesn’t exactly shout about its huge debts from the rooftops. For instance, check out the 23 page presentation for analysts that accompanies the recent Babcock & Brown Infrastructure half year result. There is simply no mention of the huge $7.5 billion debt that hangs over the group.
BBI shares fell another 2c to a record low of 89.5c in morning trade, giving it a market capitalisation of $2.1 billion despite audited claims that it has net assets of $3 billion and an NTA of $1.39 per share.
Phil Green clearly wants to break the confidence cycle because on Friday it was revealed that he had pent $484,723 buying another 376,723 BBI shares. These are already underwater and it would be most interesting if Phil revealed his own margin loan position, a bit like what we saw from Asciano CEO Mark Rowsthorn.
Babcock & Brown Power is suffering along with BBI because its shares have dived from $3.70 last June to this morning’s low of $1.485 as the market frets about its $3.5 billion debt.
Last year’s $15 billion Alinta acquisition – which was underpinned by $8 billion of Singapore Government cash – might yet prove to the deal that caused the Babcock empire an awful lot of indigestion.
When you tally up the performance of the various funds and the parent, investors are now billions underwater, yet there are dozens of Babcock bankers who remain multi-millionaires.
If you can’t create value for investors, don’t expect the funds to keep flowing in the future. Phil Green needs to turn all this around pretty rapidly.
Check out this Mayne Report video from Friday announcing the WA News board tilt.