ID :
39391
Wed, 01/07/2009 - 20:48
Auther :
Shortlink :
https://oananews.org//node/39391
The shortlink copeid
B&B `in negative asset position`
Babcock and Brown Ltd securities may fall on Thursday after the struggling investment firm warned any capital restructure would significantly dilute existing shareholders' equity.
The firm, currently trading at the mercy of its bankers, said it believes its books will show a "substantial" negative net asset position as of December 31 when it reports its full year results next month.
The investment firm made the statement after the market closed on Wednesday, saying progress on the review process for its 2008 accounts showed the negative asset position would result from a reclassification of non-core assets on the balance sheet as assets available for sale.
The Sydney-based firm said any capital restructure is expected to "significantly dilute existing shareholders, negatively impacting the value of equity."
Babcock had previously said that a debt for equity swap forming part of the capital restructuring of the firm will significantly reduce the value of any existing equity.
The move may ignite a sell-off in the firm's securities on Thursday after they fell on Wednesday, leaving them six cents, or 15.5 per cent weaker at 32.5 cents.
This followed Tuesday's 54 per cent surge on short covering and speculation a revised business model was already in the hands of its bankers.
The reclassification of the assets is in line with Babcock and Brown's revised business strategy announced to the market on November 19 and submitted to its 25-bank syndicate this week.
"The impairment process is subject to finalisation and audit review which will not be completed until closer to the scheduled release of the company's results currently expected on 26 February 2009," the firm said in a statement.
Babcock and Brown's had a net asset coverage ratio of 2.1 times applying to its corporate debt facility on June 30, 2008 when the facility did not stipulate any requirement for asset sales.
The firm posted an interim net profit of $175 million to June 30, 2008 which included the impact of impairment charges and realised losses of $441 million across its four divisions.
Since then, a series of upheavals have forced the firm to sell assets to pay down $9.2 billion of debt in order to avoid being placed into administration.
But the clock is ticking, with a suspension on financial conditions on this debt due to expire this Friday.
Babcock and Brown's revised business plan is expected to detail how it will repay a $150 million loan secured on December 5 and restructure its balance sheet.
Financial conditions on Babcock and Brown's corporate debt of $2.8 billion and $6.4 billion of limited recourse debt on the firm's balance sheet have been suspended until Friday.
The banks will hand down their verdict on the revised business model next week when investors will learn if Babcock and Brown has been saved again from being placed into administration.
The firm, currently trading at the mercy of its bankers, said it believes its books will show a "substantial" negative net asset position as of December 31 when it reports its full year results next month.
The investment firm made the statement after the market closed on Wednesday, saying progress on the review process for its 2008 accounts showed the negative asset position would result from a reclassification of non-core assets on the balance sheet as assets available for sale.
The Sydney-based firm said any capital restructure is expected to "significantly dilute existing shareholders, negatively impacting the value of equity."
Babcock had previously said that a debt for equity swap forming part of the capital restructuring of the firm will significantly reduce the value of any existing equity.
The move may ignite a sell-off in the firm's securities on Thursday after they fell on Wednesday, leaving them six cents, or 15.5 per cent weaker at 32.5 cents.
This followed Tuesday's 54 per cent surge on short covering and speculation a revised business model was already in the hands of its bankers.
The reclassification of the assets is in line with Babcock and Brown's revised business strategy announced to the market on November 19 and submitted to its 25-bank syndicate this week.
"The impairment process is subject to finalisation and audit review which will not be completed until closer to the scheduled release of the company's results currently expected on 26 February 2009," the firm said in a statement.
Babcock and Brown's had a net asset coverage ratio of 2.1 times applying to its corporate debt facility on June 30, 2008 when the facility did not stipulate any requirement for asset sales.
The firm posted an interim net profit of $175 million to June 30, 2008 which included the impact of impairment charges and realised losses of $441 million across its four divisions.
Since then, a series of upheavals have forced the firm to sell assets to pay down $9.2 billion of debt in order to avoid being placed into administration.
But the clock is ticking, with a suspension on financial conditions on this debt due to expire this Friday.
Babcock and Brown's revised business plan is expected to detail how it will repay a $150 million loan secured on December 5 and restructure its balance sheet.
Financial conditions on Babcock and Brown's corporate debt of $2.8 billion and $6.4 billion of limited recourse debt on the firm's balance sheet have been suspended until Friday.
The banks will hand down their verdict on the revised business model next week when investors will learn if Babcock and Brown has been saved again from being placed into administration.
