Kiwi investors force Babcock & Brown in voluntary administration

Debt problems have pushed Babcock & Brown International to sell 58pc of its stake in local network company Powerco.

Debt-laden investment firm Babcock & Brown Ltd has been placed into voluntary administration after NZ investors rejected a proposed debt restructure.

Babcock says it has appointed David Lombe and Simon Cathro of Deloitte Touche Tohmatsu as voluntary administrators.

Babcock shares and Australian notes have already been suspended from trading, with a suspension of its New Zealand notes likely to follow.

All securities are likely to be removed from the relevant exchanges, Babcock said.

The appointment of administrators was not expected to have an impact on parent company Babcock & Brown International Pty (BBI), Babcock said.

BBI would continue with its asset sale over the next two to three years.

In a vote on Friday, 58.14 per cent of the investors in Babcock's subordinated notes listed in NZ voted against a proposed restructure of the subordinated notes, Babcock said in a statement.

Holders of Babcock notes in NZ and Australia were required to approve the restructure for it to go ahead.

The Babcock board met after the decision and appointed the administrators.

Babcock's equity and note holders are not expected to receive any return, the company said.

There are approximately 4,500 noteholders in NZ and approximately 3,500 noteholders in Australia.

"The board and management of Babcock & Brown deeply regret the loss of subordinated note and shareholder value that has occurred and acknowledge the financial hardship this has caused," it said in a statement.

The board were disappointed the restructure of the notes could not be achieved as it believed it would have produced "a potentially better result for all investors in the company's securities".

Babcock had agreed with its bankers on a restructure of its corporate debt and a revised business plan that would facilitate the reduction of corporate debt facilities.

The agreement provided for a $150 million short-term facility entered into in December 2008 and two other existing $2.8 billion and US$200 million corporate facilities to continue.

The facilities will be restructured and the repayment dates changed.

Under the business plan, Babcock chief executive Michael Larkin and senior management were to sell down company assets over two to three years to reduce debt.

A media release from Deloitte Australia said the role of the Voluntary Administrators would be to investigate the company's affairs.

It says noteholders and creditors would soon be written to, with details of the first meeting of creditors, to be held on March 25. These meetings will be in Australia and New Zealand.

During the first meeting, the voluntary administrators will ask for creditors to nominate a committee to assist with the administration.

"Our aim will be to seek advice from noteholders and creditors about any matters that need to be investigated and reviewed," said Lombe.

"Due to the complexity of the matter, it is likely that the Voluntary Administrators will seek an extension of the standard 20 business day convening period for the second creditors meeting, which will require court approval.

- AAP/HERALD ONLINE