Brookfield Asset Management Inc. and its partners will acquire half of an Australian coal terminal and all of an English port business as part of a $1.1-billion (U.S.) deal with Babcock & Brown Infrastructure of Sydney.
Toronto-based Brookfield and Brookfield Infrastructure Partners LP said they will own 40 per cent of Babcock & Brown Infrastructure, which is focused on the transport, energy infrastructure and utilities sectors.
Babcock & Brown, which has been actively seeking buyers over the past 18 months in order to deal with its massive debt load, has assets in Australia, the United States, the United Kingdom, Europe, New Zealand and China.
The Brookfield group will buy from $555-million to $635-million of securities issued by the Australian company, also known as BBI.
In addition, Brookfield will pay $265-million for a 50-per-cent stake in a coal terminal in Queensland Australia and 100 per cent of PD Ports in northeastern England. Brookfield will also repay $160-million owed by PD Ports.
"This transaction is a significant step forward in Brookfield's global infrastructure growth plan and enhances our position as a leading global infrastructure asset manager," said Sam Pollock, senior managing partner and chief executive officer of Brookfield's infrastructure group.
"It will add approximately $8-billion of assets under management to Brookfield's infrastructure platform and expand our presence in the important and growing transportation and energy infrastructure sectors," Mr. Pollock said.
The recapitalization deal has been designed to reduce Babcock's debt leverage to levels that are sustainable in the long-term, the companies said.
Babcock's chairman David Hamill said the plan had the full support of the company's board and management team.
"The past two years have been immensely challenging for BBI, and we have undertaken a comprehensive process to review alternative strategies for the restoration of securityholder value," Mr. Hamill said in a statement.
As of June 30, Babcock & Brown Infrastructure had more than $8.8-billion (Australian) in debt, including $3-billion maturing within two years.
As part of the restructuring, Babcock will also change its name to Prime Infrastructure.
Brookfield Asset Management Inc. is focused on property, renewable power and infrastructure assets.
Babcock has been trying to sell infrastructure assets it bought before the onset of the global financial crisis and said in Thursday's statement it could be placed in administration - similar to bankruptcy protection in the U.S. - if the recapitalization doesn't go ahead.
Babcock, which in August severed the relationship with its management company, failed investment firm Babcock & Brown, has a portfolio of transportation and utility assets in Australia, the U.S., Europe, New Zealand and China.
Babcock said it plans to raise $1.5-billion by selling new shares - up to $713-million of that cash would come from Brookfield, and the rest from institutional investors.
- With files from the Associated Press