B&B to specialise to survive

Babcock & Brown (B&B) will bow out of its involvement in all parts of its business except infrastructure in a bid to survive the current market crisis.

The group said today it would “further narrow and simplify” its focus to become a specialist infrastructure investment business, placing its real estate, operating leasing, corporate and structured finance operations and assets and loans to B&B Power, as well as some infrastructure assets, up for sale.

The B&B group will now be split into two parts. The infrastructure business will incorporate funds management operations and stakes in core listed and unlisted infrastructure funds, as well as the group’s wind, thermal and solar projects.

The group said the businesses and assets outside the new segregated infrastructure business would be managed by existing employees, “with a focus on preserving value while preparing those business[es] and assets for divestment as and when opportunities arise”.

The group will reduce its staff numbers from 1,450 to 600 by 2010, either through redundancies or as a result of the sale of businesses. In June this year B&B employed 1,600 people.

There is no set timetable for these sales. B&B chief executive Michael Larkin said there had already been interest expressed in the group’s real estate and operating leasing businesses, but that discussions were ongoing.

B&B’s lenders have been advised of the plan, with the group estimating the restructure will repay more than half of the group’s $3.1 billion debt by 2011. But in the short term, the group is proposing a restructure of its debt facilities, including a possible extension to its current facilities. The group said it would be difficult to meet its current repayment deadlines in the near term given the current market conditions.

The group is also aiming to reduce its operating costs (excluding remuneration) by more than half (in excess of $150 million) by the end of 2010.

B&B has been working on a planned restructure of its operations since June this year in the face of crippling debt levels and a loss of shareholder confidence as a result. The group aims to have largely implemented the restructure by mid-2009.