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Babcock warns shares could become worthless

As the struggling firm continues its negotiations with its syndicate of lenders to restructure its balance sheet, it is warning investors that any agreement will likely leave “no value for equity holders” and “negligible or no value” for holders of the company’s subordinated debt.

Babcock & Brown has warned investors that its ongoing discussions with its syndicate of lenders regarding a debt-for-equity swap will likely leave its publicly traded shares worthless.

The plan under consideration would require the firm’s syndicate of 25 lenders to convert A$2 billion (€1 billion; $1.3 billion) of Babcock & Brown’s debt into perpetual notes, The Australian Financial Review has reported, citing unnamed sources. Those perpetual notes would be more senior than the firm’s ordinary shares and A$600 million of subordinated debt, the Review said.

On Friday, Babcock said that it is continuing its negotiation with lenders and that any agreement will likely leave “no value for equity holders” and “negligible or no value” for holders of the company’s subordinated debt.

On 7 January the firm announced that it was in negotiation with its syndicate of lenders regarding a debt for equity swap “or equivalent restructuring” to stabilise its long-term capital structure.

Its shares have been in a trading halt since then. At the last closing price of A$.33 per share, the firm had a market capitalisation of A$121 million.

Babcock said that it expects to announce the outcome of its discussions with lenders at the end of this week or early next week.