The flurry of activity at Babcock & Brown continues apace with a $220 million share placement overnight plus a substantial renegotiation of debt arrangements with an expanded syndicate of 25 banks.
The frenetic recent activity is all laid out in today’s presentation. Just three months ago, Babcock & Brown was overloaded with $2.9 billion of current liabilities. Now this entire amount has been paid down or renegotiated and the Macquarie Group impersonator has even produced a new market capitalisation repayment trigger of $2.5 billion.
After the issue of 16.12 million new shares at $13.65 – a hefty 8.4% discount to Wednesday’s closing price of $14.90 – Babcock’s market capitalisation expands to $4.57 billion after adjusting for today’s 35c drop to $14.65.
Babcock CEO Phil Green has previously gloated that his top bankers own about $1 billion worth of stock with margin loans of only $50 million. If that is true, surely the cashed up Rich Listers would have participated in last night’s surprise raising.
As a small shareholder, I’m dirty that Babcock has failed to announce a share purchase plan on the same terms as these privileged insiders who are already enjoying a $16 million paper profit on the placement.
It is worth once again reading this KGB interrogation of Phil Green on Business Spectator over Easter. The lad was clearly up to his eye-balls in negotiations with his bankers as he was out there attempting to smooth the market.
If Green had said “we’re attempting to renegotiate new terms with our bankers and will also be forced into a knockdown share placement next week”, there is no way the stock would have recovered strongly from its pre-Easter lows of almost $12.
There is an awful lot of aggressive spinning going on as debt-laden companies battle the new reality of the global credit crunch.
Michael Pascoe has been punching a few holes in the Babcock story for Crikey, but at least the financial engineers only claim to have net assets of $2.5 billion when the market cap is almost double that.
Allco Finance Group signed up to a balance sheet claiming $2.4 billion of net assets when the market assessment is $200 million.
Even the Goodman family has been pushing the envelope after excessive debt forced them to dump $288 million of stock in their industrial property group to pay off all margin loans.
A publishing glitch left this Goodman story out of the Crikey Daily yesterday, but it paints a far different picture to Robert Harley’s front page interpretation in The AFR today.
Harley claims the Goodman family wealth has only dropped from $1.6 billion to $1.2 billion. If they really had another $700 million of net worth floating around, why would they do a fire sale of half their stake to eliminate margin loans that had reached more than 50% of the value of the holding?
Today’s Mayne Report video cuffs Macquarie and lauds the Rio annual report.
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