Babcock & Brown share slump prompts speculation of Eircom sale by year end

BABCOCK & BROWN has denied reports that it will sell Eircom, its Irish telecoms subsidiary within the year.

The Australian investment group is being forced to sell off significant assets following a massive dip in it shares last week.

Its shares lost a whopping 53% last week as investors feared key lenders would foreclose on the group, due to its massive debt burden.

Comments over the weekend, however, left the door open on the future of the Irish telecoms giant, which also owns Meteor, the third mobile operator in Ireland.

“We’re holding on to the asset for the medium term,” said Erica Borgelt, a spokeswoman for Babcock in Sydney.

“We are not selling at the moment and it’s business as usual at Eircom,” Bloomberg reported the company as saying.

Eircom’s future was raised by a Sunday Tribune report last weekend, which said there was more than a 50% chance the telecoms group would be sold within a year.

If so, it would be the fifth change in ownership for the former state-owned company since it was floated in 1999.

Right now the group looks to have more pressing priorities and is trying to sell assets to pay off some of its bank debt.

Babcock expects offers for European wind farms this week and is on schedule to sell assets including the Enersis business in Portugal in the third quarter.

Chief executive Phil Green is in top level talks with bankers after last week’s slump pushed Babcock's market value below A$2.5 billion (€1.5bn).

Under current lending terms to the group, its bankers have the right to force the Sydney-based company to pay back debt early or sell assets if it remains below that level at the end of a four-month review period.

Meanwhile ABC News in Australia has reported Babcock and Brown Power (BBP) has announced it has been able to refinance its $2.7bn debt.

Concerns about the listed fund’s debt level intensified last week after news that its earnings would be hit by the gas outage in western Australia.

BBP says it is also hoping to finalise another $360 million refinancing by the end of August. It is not clear at this stage how the refinancing deals will affect Eircom’s future, in which Babcock & Brown Capital bought an initial stake back in 2005.

Eircom has also denied the rumours of a sale anytime soon.

They also denied that the mobile subsidiary would be sold.

Pierre Danon, chairman of Eircom, stepped down from his post last week as the funding crisis in the parent company took hold, adding to speculation about the future of the Irish group. He was appointed chairman by the Australian group at the time of the takeover.