The Australian investment firm Babcock & Brown put about half of its asset base up for sale Wednesday, announced sweeping job cuts and sought to renegotiate its bank debts to safeguard its future.
The group, trapped between tumbling asset values and a need to repay debt of about 3 billion Australian dollars, or $2 billion, over the next three years, said it would be difficult to meet existing debt facilities in the near term, given the meltdown in markets.
‘‘Discussions with the banks regarding these changes are ongoing and may not be concluded before the end of December this year,’’ the company said.
Babcock & Brown plans to refocus entirely on its infrastructure business and sell its other businesses: real estate, leasing and corporate and structured finance. The businesses outside its infrastructure account for a bit more than 50 percent of the group’s book assets, according to its balance sheet as of June 30, though infrastructure now accounts for the vast preponderance of Babcock & Brown’s revenues.
The group said it would cut more staff members and more than halve operating costs by 2010. It aimed to cut about 60 percent of its work force, bringing its staff down to 600 during 2010 from 1,450 now.
The group’s restructuring plan is intended to repay more than 50 percent of Babcock & Brown’s current 3.1 billion dollar corporate debt facilities by 2011 and restore shareholder value that had been eroded in market turmoil and investors’ concerns about high levels of debt.
Babcock & Brown shares have plunged 99 percent this year, taking it from one of the market’s biggest companies, worth about 10 billion dollars, to a small cap worth only about 100 million dollars.
The stock dropped 19 percent to 25 Australian cents at the close in Sydney, extending declines this week to 48 percent.
Standard & Poor’s cut its rating for Babcock & Brown International, a wholly owned unit of the asset manager, to CCC+ on Wednesday.
‘‘Given the global financial market conditions, and Babcock International’s recent experience, we believe that the company is likely to face significant challenges in selling its assets and businesses, and consequently reducing its debt at the corporate level,’’ the ratings company said in a statement.
Babcock & Brown Infrastructure Group, a fund managed by Babcock & Brown, said it was examining the potential sale of as much as 49 percent of Australia’s second-biggest coal-export harbor after drawing interest from potential bidders.
The company, which said Nov. 5 that it would ‘‘only look to sell down if the price is right,’’ warned that divestments were ‘‘extremely difficult.’’ Wachovia may seize collateral on a $112 million loan, Babcock said this week, putting it at risk of losing as much as $41 million on a real estate venture with GPT Group.
Wachovia’s warning came even as Babcock announced the sale of Enersis, its wind energy business in Portugal, for about ¤1.15 billion, or $1.45 billion.
Proceeds of 285.8 million dollars from that sale will not go toward fulfilling an agreement made in June with lenders to repay 400 million dollars.
‘‘They’re trying to do everything they can to keep the banks on board, because without their acquiescence it’s all over,’’ said Richard Wallace, who helps manage about $100 million at Wallace Funds Management in Sydney.
‘‘The restructure will come to naught unless they can sell assets, and in this market you won’t get anything approaching book value for at least the next six months.’’ Babcock’s interest cover ratio — a measure of its ability to repay debt — was 5.3, the company said in June. That exceeds the three-times ratio required by its bankers. Its total interest-bearing debt stands at 9.6 billion dollars.
Babcock agreed to pursue asset sales to cut debt June 30 after its market value slumped below a threshold that allowed bankers to start reviewing the company. It was also forced to pay an additional 10 million dollars a year in interest.