Power offshoot changes name and does a deal on debt
Sydney Morning Herald
Saturday December 19, 2009
THE troubled utility Babcock & Brown Power took a stop closer to salvaging some value for shareholders yesterday by striking an agreement with its bankers to restructure a crippling debt of $2.7 billion.The deal with its 11-member banking syndicate to restructure the debt facility and extend the repayment date followed weeks of talks over a gas contract in Western Australia.At its annual meeting in Sydney yesterday, BBP also agreed to change its name to Alinta Energy, thereby severing another link to its former parent, the collapsed Babcock & Brown empire. Last week it agreed to pay B&B $444 million in debt and fees.BBP shares are expected to resume trading soon as a result of yesterday's debt reprieve. They have been in a month-long suspension at 7.6c.The need to restructure the debt arose from a gas contract arbitration decision relating to BBP's Alinta business, which left BBP owing millions to the North West Shelf joint-venture.Failure to reach an agreement on the debt could have sunk the company, because it would have been unable to meet its interest payments.The oil and gas giants behind the North West Shelf have also agreed to a moratorium on the money they are owed, giving BBP valuable time to pay down its debt and restore shareholder value.Under the deal with its lenders, the repayment date has been extended until 2012 and debt covenants will be set with reference to the company's five-year budget plans.BBP's chairman, Len Gill, said it had been an "extraordinarily demanding" year. The company has lost 98 per cent of its market value since 2007 after taking on too much debt.But it still faces an uphill battle to generate shareholder value because of the weight of the debt. Mr Gill said all options were on the table for reducing the load, including equity injections from cornerstone investors and asset sales.
© 2009 Sydney Morning Herald