SHARES IN Babcock & Brown, the troubled Australian investment bank that ultimately controls Eircom, have been suspended in Sydney pending a decision tomorrow on possible changes to its board and management.
The bank, which manages Eircom's immediate parent Babcock & Brown Capital (BCM), requested the suspension last night after the Australian Securities Exchange queried a 23.5 per cent drop in its share price, a fall that brought losses in the past 12 months to more than 80 per cent of its share price.
With media reports in Australia stating that Babcock & Brown chief executive Phil Green and executive chairman Jim Babcock might step down early, the bank said it was not in a position to make any announcement pending a board sub-committee meeting tomorrow morning.
"While no decision has been made, a sub-committee of the company's board is meeting . . . when necessary information is available to them, to consider and make a decision on board changes as part of our response to corporate governance issues that have previously been raised and management changes in the context of our announced strategic review," the bank said in a statement.
The latest loss of investor confidence in the bank, whose stock has lost half its value since a profit warning at the start of last week, stems from renewed concern about the viability of its business model.
There is also concern that credit market turmoil may cut proceeds from asset sales to reduce its debt, which currently stands at about Aus$11 billion (€6.49 billion).
Babcock & Brown owns about 8 per cent of BCM, a satellite fund that owns 57 per cent of Eircom alongside an employee share ownership trust, which has a 35 per cent stake in the former State telco.
BCM has sought to distance itself from the troubles of its manager, which had to seek a reprieve from its lenders in June when its share price dropped below a level that can trigger a debt review.
As BCM's own stock came under pressure at the time, high-level sources speculated in private that a combination of its weak share price and the threat of a review of its manager's debt could push the fund towards a sale of Eircom in the next year.
Such claims were dismissed by BCM director Rob Topfer, chief of the Babcock & Brown corporate finance unit that orchestrated BCM's €2.36 billion takeover of Eircom in 2006.
In Mr Topfer's account, BCM would be happy to retain ownership of Eircom for the next five years.
However, reports in the Sydney Morning Herald suggest that the expected management reshuffle in Babcock & Brown is likely to to result "in the winding back" of the corporate finance unit led by Mr Topfer.
This would be part of a move away from the bank's "wheeler-dealer" image as a constant buyer and seller of assets.
There was no comment on that yesterday from Eircom's chief spokesman or on any other issues arising from the suspension of Babcock & Brown's shares.
The closing stock price last night of Babcock & Brown Capital implies a market capitalisation of A$532.48 million on the fund, a sum that is dwarfed by Eircom's €4.26 billion debt.
