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oops Babcock and Brown in trouble

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  • 13-06-2008 3:37pm
    #1
    bealtine
    Registered Users Posts: 4,051 ✭✭✭


    The Irish Times reports that Australian investment bank Babcock & Brown, which ultimately controls Eircom, is facing a review of AUD2.8 billion (EUR1.7 billion) in debt after a 28 percent share price collapse in one day brought its market capitalisation to levels at which its banks can seek early repayment. Babcock & Brown, which orchestrated the takeover of Eircom in 2006 by a specialist investment fund, has seen its value drop by 75 percent this year amid questions over the viability of its business model and investor worries about heavily indebted companies.


    Did Pierre see this coming?


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    #2
    Cabaal
    Moderators, Technology & Internet Moderators, Regional South East Moderators Posts: 28,470 Mod ✭✭✭✭Cabaal


    uh oh, they'll have some job trying to sell of Eircom if they needed to especially with the current market changes


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    #3
    smellslikeshoes
    Registered Users Posts: 3,354 ✭✭✭smellslikeshoes


    bealtine wrote: »
    Did Pierre see this coming?

    I can only imagine so, was a very good move by him. I think its going to keep getting worse and Pierre has gotten out before his reputation has got soiled which I eventually think it would have been if he stayed.


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    #4
    crawler
    Registered Users Posts: 1,660 ✭✭✭crawler


    http://www.theaustralian.news.com.au/story/0,25197,23860364-643,00.html

    To be clear on this - it is a bad thing. It is not good for incumbent operators to be in situations like this. Bad for everyone, including consumers.


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    #5
    kaizersoze
    Registered Users Posts: 7,042 ✭✭✭kaizersoze


    From RTE:
    But Babcock & Brown Capital (BCM) - the subsidiary which owns Eircom - said it did not have any cross-shareholdings or loans with the parent company or any of its funds. It added that Eircom's debt had no conditions linked to the financial position of Babcock & Brown in Australia.

    http://www.rte.ie/business/2008/0613/babcock.html


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    #6
    Sponge Bob
    Banned (with Prison Access) Posts: 25,234 ✭✭✭✭Sponge Bob


    Wasn't it the FT described eircom in March as a zombie company .

    The real damage was done 2 years back when Con Scanlon and BnB conspired to load it with €4bn of debt denominated off 3 month euribor+2% (in general) with €1bn of that at euribor+5%

    This euribor rate has risen dramatically this year to 5% , it was c. 3.3% back then

    1.7% of €4bn is another €60m in servicing costs per annum, it shows no sign of dropping either.

    Thats about the entire annual DSL upgrade budget as projected in 2006 .

    http://www.ft.com/cms/s/0/dfd7de28-f9d2-11dc-9b7c-000077b07658.html
    What do a Spanish clothing retailer, an Irish telecommunications group, a German maker of plastic packaging film and a French house-builder have in common?

    They are all so-called “zombie” companies, bought by private equity in heavily leveraged deals shortly before the debt bubble burst last summer and now judged by investors to be worth less than they owe to creditors.

    “These are zombies, companies with unsustainable financial structures but no triggers for the banks to force them to renegotiate,” says Edward Eyerman, head of European leveraged finance at Fitch.

    They include: Cortefiel, the Spanish clothing vendor acquired by PAI, Permira and CVC in 2005; Eircom, the Irish telecoms group bought by Babcock & Brown in 2006; and Klöckner Pentaplast, the German plastic film maker sold to Blackstone last year.

    Cortefiel’s senior bank debt was recently quoted at 67 per cent of its par value, suggesting that the equity owned by the private equity firms is worthless.

    Klöckner and Eircom also have debt trading at discounts of 15-30 per cent to par.

    None of this is new, it started with the credit crunch last July .


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    #7
    crawler
    Registered Users Posts: 1,660 ✭✭✭crawler


    To be fair - the Babcock fund for eircom and Golden pages (BCMI) is a SPV and is seperate to the main fund. It does not share the same obligations and covenants. However they may need to sell off assets to refinance or reduce debt on the main fund so it could be indirectly impacted.

    It's all speculation - It does show the damage hedge funds can do to you though when they turn nasty....


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    #8
    Sponge Bob
    Banned (with Prison Access) Posts: 25,234 ✭✭✭✭Sponge Bob


    The SPV Crawler mentioned that is the legal owner of eircom is called BCM

    BCM made the following announcement friday stating that there was no technical covenanting link between BCM debt and B and B share values.

    http://www.asx.com.au/asx/statistics/showAnnouncementPDF.do?idsID=00850511

    BCM shares show a drop but nothing like Babcock and Brown itself .

    http://www.asx.com.au/asxcharting/CisServGif?RequestType=ByName&UseSession=False&GifResponse=image&fresh=false&extgif=true&caller=sharenet&volval=VOL&periods=D6&spread=LAST&siafsec1=S&sec1=BCM&divn1=0&siafsec2=I&sec2=XJO&divn2=0&siafsec3=I&sec3=MA&divn3=0&extcsv=false&reducefact=80&fromdate=16/12/2007&todate=16/06/2008


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