Australian infrastructure and investment banking group Babcock and Brown appeared close to collapse on Tuesday morning after trading in its shares was halted until Wednesday and its rating withdrawn while it has further discussions with its bankers. (Updated from newsletter to include ratings withdrawal and director resignations). S&P withdrew its long and short term ratings for Babcock & Brown after it had cut its long term rating to CC over the weekend, one notch above default. A default of Babcock & Brown leaves the future of over NZ$1 billion worth of debt and hybrid securities in doubt, including a big chunk held by the New Plymouth District Council, who sold Powerco to B&B in 2006 for cash and hybrid "SPARK" securities. Meanwhile, Babcock & Brown is fighting to get its hands on a A$70 million deposit stuck in German bank Hypo Vereinsbank, which itself had to resort to a bailout from the German government. There is a variety of debt connected to the New Zealand assets owned by Babcock and Brown, including the 50% stake it owns in New Plymouth based power and gas networks company Powerco, New Zealand's second largest group. It sold 50% to the Queensland Investment Corp earlier this month. There are A$331 million worth of Powerco notes on issue according to B&B's 2008 annual report. There are also NZ$250 million of Powerco bonds on issue. BBI Networks also has NZ$150 million of secured bonds on issue. There are also A$113.7 million worth of BBI Networks (NZ) SPARKs hybrid securities on issue, according to the annual report. These SPARKs are currently trading at a yield of 85%. Babcock and Brown Land Partners is also a heavy investor (NZ$43 million) in the Jacks Point development near Queenstown. Two directors of Babcock and Brown, Deiter Rampl and Joe Roby, resigned on Monday not citing reasons for their resignations. Rampl had previously worked at Hypo Vereinsbank. * This article was first published yesterday in our daily subscription newsletter for the banking and finance industries. The email costs NZ$365 per annum and carries exclusive news and analysis for New Zealand banking and finance industry executives, regulators and investors. Sign up for a free trial here.
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