Finance and investment giant Babcock & Brown has been forced into voluntary administration after creditors of the company in New Zealand voted to reject a plan to restructure the company’s debt.
The move comes after a harrowing 12 months for the company, which had modelled itself on banking giant Macquarie Bank and accumulated more than $50 billion in debt. The company’s shares have crashed from $26.80 at the start of 2008 to just 32.5c, obliterating the fortunes of key executives such as Phil Green and founder Jim Babcock.
Last month, Babcock & Brown agreed on a debt restructuring deal and a revised business plan with its lenders after lengthy negotiations.
But the company needed to gain the agreement of holders of its subordinated notes to change the terms of those notes. New Zealand creditors rejected the new deal and as a result Babcock and Brown’s directors had no choice but to call in voluntary administrators.
“The board and management of Babcock & Brown deeply regret the loss of subordinated note and shareholder value that has occurred and acknowledge the financial hardship this has caused,” the company said in a statement.
“The board and management are disappointed that a restructure of the notes could not be achieved as the board believes…that the restructure would have produced a potentially better result for all investors in the company’s securities.”
Babcock & Brown International Pty Ltd, the main operating and asset-owning entity of the Babcock & Brown Group, will continue to operate and “will proceed with the orderly realisation of assets over an approximate two-to-three year time horizon to reduce debt”.
David Lombe and Simon Cathro of accounting firm Deloitte Touche Tohmatsu have been appointed as voluntary administrators.
The collapse of Babcock & Brown means another one of Australia’s boom-time finance companies has fallen over. Last year finance and property companies Allco Finance Group and MFS (also known as Octavier) were placed in receivership.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
