After dismissing rumours on Friday that it would be forced to sell some of its holdings, investment firm Babcock and Brown (BNB) further reassured investors today after it said it has retired more than $250 million of short-term margin loans from existing resources and received commitments for new term finance.
The group said the new term finance is to eliminate the short term margin loans secured against marketable securities in Babcock & Brown managed funds.
Despite the optimistic note, Babcock shares went down for the third straight session, hitting a 52-week low of $12.90 during intraday trading. This is nearly one third the high of $34.63 it hit back in June 2007.
Shares in BNB ended 16 cents down or 1.15% to $13.80 from its previous close.
In a statement to the market on Monday, BNB said the new financing facility contains no market price-based covenants, no margin call obligations and no obligations to post additional collateral based on the prevailing market price of securities in Managed Funds.
“Today’s announcement removes all short term debt secured against marketable securities in BNB managed funds and reconfirms our statement on Friday that we have no intention or requirement of any interest in our managed funds,” chief executive officer Phil Green said in the statement.
“This further demonstrates that we continue to have multiple funding sources and in particular we have a large number of strong banking relationships which provide us with flexible funding solutions to support our business,” Green added.
The statement might relieve some investor worries which had grown as concerns about short term funding levels at investment banks and financial engineering stocks, had soured sentiment toward the sector.
Babcock reaffirmed its 2008 group net profit outlook of $750 million. It said this figure represents growth of more than 15% on the 2007 result.
The Sydney-based group’s shares experienced the biggest fall in almost two months on Friday when the shares shed $1.54 or 9.9% to $13.96.
Its major rival, Macquarie Group, also fell today, down 0.9% to $45.85, after rising as much as 2.4 percent in early trade.
