Babcock & Brown Sells Enersis Wind Assets to Cut Debt

By Angela Macdonald-Smith and Stuart Kelly

Nov. 17 (Bloomberg) -- Babcock & Brown Ltd., the Australian asset manager that's selling assets to repay debt, sold its Enersis wind energy business in Portugal for about 1.15 billion euros ($1.4 billion) to investors led by Magnum Capital.

Babcock & Brown, which owns Enersis jointly with its wind energy fund, received net proceeds of A$285.8 million ($182 million) from the sale of its 50 percent stake, the Sydney-based company said today in a statement to the Australian Stock Exchange.

Babcock slumped to a record low in Sydney trading last week, and has lost more than half its value since Nov. 6, when ABN Amro Holding NV analyst John Heagerty said Babcock may breach loan agreements because the global credit crisis has made selling assets harder.

The proceeds from the sale will be used to help pay A$9.6 billion of debt, and doesn't form part of the A$400 million that the company said in June it will pay its bankers, Babcock spokeswoman Erica Borgelt said today.

Babcock is competing with distressed asset sellers from Detroit to Brisbane to avoid the fate of Allco Finance Group Ltd. and ABC Learning Centres Ltd., two Australian companies that were placed in the hands of outside managers this month. Babcock & Brown Infrastructure Group, one of Babcock's 12 publicly traded funds, said Nov. 5 that divestments are ``extremely difficult.''

France, Greece

Babcock in December 2005 bought the Enersis project for 490 million euros and then sold half to affiliate Babcock & Brown Wind Partners. The company plans to sell its remaining stakes in wind assets in Portugal, France, Greece and Germany, it said today.

Babcock & Brown Wind Partners said in a separate statement today it will receive net cash proceeds of about A$274 million from the sale of its 50 percent stake, on which it made a loss of A$11.7 million.

Magnum, based in Madrid and Lisbon, will contribute 65 percent of the equity in the deal, the buyout fund started by former chief executive officers of Banco Santander SA and EDP- Energias de Portugal SA. said in a statement yesterday. The rest is funded by mainly Portuguese partners including Espirito Santo Capital, Banco Espirito Santo SA's private equity firm.

Babcock, founded in 1977, is the worst performer on the MSCI AC Asia Pacific Index of 988 companies this year, tumbling 98 percent. Chief Executive Officer Michael Larkin was promoted to replace Phil Green in August after the company posted its first drop in profit.

Babcock agreed to pursue asset sales to cut debt on 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 A$10 million a year in interest.

Babcock's interest cover ratio -- a measure of its ability to repay debt -- was 5.3 at the end of June, the company said. That exceeds the 3 times ratio required by its bankers.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.netStuart Kelly in Sydney skelly22@bloomberg.net