Babcock given A$150m lifeline

The firm’s banking syndicate will provide temporary liquidity in an attempt to secure the future of the grossly indebted firm.

Australian infrastructure specialist Babcock & Brown has secured a A$150 million (€78 million; $96million) debt lifeline from its existing lenders.

It has agreed a “pay if you can” basis for all interest on the debt facility and all existing facilities. No dividends will be repaid on ordinary Babcock & Brown shares until the facility is repaid.

The firm and its banking syndicate have also agreed to suspend all key financial covenants from the existing facilities.

Babcock shares doubled in value to A$0.40 today after coming out of a two-week suspension when the agreement with the banks was made public.

Investors have seen the value of Babcock shares plummet from a high of $35 each last year.

The firm, which is more than A$3 billion in debt, will work with its banks to restructure the capital of the group. This is expected to include a debt for equity swap.

“We appreciate the efforts of our banking syndicate, [which has] moved quickly to provide measures to address some of the immediate funding requirements,” Michael Larkin, Babcock chief executive, said in a statement.

Larkin warned that there may be a period of “significant volatility in the earnings base of the business”, during the restructuring.

The firm which operates 30 offices worldwide is expected to confirm its long term restructuring plans in February 2009.