Troubled firm Babcock & Brown linked to US equity giant KKR
Babcock & Brown has declined to comment on rumours that US private equity giant Kohlberg Kravis Roberts (KKR) may have begun running the rule over the firm, whose listed Australian fund owns over 57pc of Eircom.
Some press reports claim that KKR and HSBC have separately engaged advisers to examine Babcock & Brown's assets. Shares in the group were subjected to a massive sell-off after investors began panicking about the sustainability of its highly leveraged business model.
The fall in its shares also led to a position where its market capitalisation had tumbled to a level at which lenders could initiate a review of Babcock's debt.
A spokesman for KKR also declined to comment on the reports. However, KKR recently raised an estimated $5bn (€3.2bn) that will be used to invest in global infrastructure assets.
It will be the first time that the private equity group has targeted the sector.
Babcock & Brown's associated listed and unlisted funds encompass a raft of infrastructure assets, including telecoms, energy, railways and property.
It has been speculated that KKR could be interested in using some of the money it has raised under its latest fund to acquire at least some of the assets owned by Babcock & Brown. Babcock & Brown Capital owns 57.1pc of Eircom, while Babcock & Brown owns 8pc.
Control
It is believed that any private equity group that might attempt to wrestle control of Babcock & Brown could face stiff challenges, as 40pc of the Australian firm is owned by roughly 1,400 staff. However, they are unlikely to want to sell their holdings at anywhere near the current market price, which is seen to significantly undervalue the group.
KKR has hired George Bilic, former managing director of Lazard, where he was responsible for its power, energy and infrastructure activities, to front its new global fund.
Babcock & Brown Capital said last week it planned to commence a buy-back tender offer to return value to shareholders. That comes on the back of a market buy-back initiated late last year following pressure from an activist hedge fund.
- John Mulligan
