During the past month Babcock and Brown's (B&B) share priced has plummeted from $A12.91 ($NZ16.14) to trade about $A6.86 yesterday, causing widespread investor and market concern and slashing its overall market capitalisation by 48%, from $A4.3 billion to $A2.2 billion, in turn triggering a bankers' review.
In June last year, B&B's share price was at an all-time high of $A34.63.
Managing director of B&B subsidiary Babcock and Brown Residential Land Partners (BLP) Michael Balkin said from Sydney yesterday the "issues" with the parent company would not affect Queenstown developments and that the developments were not under review.
Jacks Point was predominantly pre-sold and carried little market risk, while the Henley Downs development was fully funded, but two years away from starting production, he said.
BLP's interest in the 400ha Jacks Point is 411 residential lots, of which 349 have been pre-sold.
The company also has a 50% stake in the adjacent 681ha Henley Downs and its 959 lots, yet to be developed but expected to be completed by 2015.
Mr Balkin said neither development carried mezzanine funding, which has interest rates of 17% to 25%, and while Hanover Finance had purchased some retail lots, it was not involved with BLP financing.
ABN Amro Craigs broker Peter McIntyre said the B&B share downturn was due to large hedge funds selling down their B&B holdings in an attempt to sell short and re-buy the shares for a profit when they rose again.
The funds might also be looking to acquire subsidiary B&B assets as they come up for sale, he said.
"It's highly likely a review has begun and most of their assets will be part of that review," Mr McIntyre said.
At the heart of the matter is a $A2.8 billion refinancing loan to B&B from 25 banks in April, now worth more than the value of the company's shares which have fallen below an agreed $A2.5 billion threshold.
Mr McIntyre said the company had four months to deal with a strategic review of operations.
At the present capitalisation level, ABN believed the review had already been triggered, with all assets' market value, dividend flow, strategic value and liquidity being assessed.
Last November, BLP bought the adjoining subdivisions of Jacks Point and Henley Downs for $43.3 million from the original developer, Queenstown-based Darby Partners Ltd.
Mr McIntyre said under B&B's business model a "benign" investment environment suited its subsidiaries and funds, but the global credit crunch put that model "under a great deal of pressure".
ABN research revealed that the investments had cost the 12 subsidiaries involved $A893 million and were valued at more than $A1 billion.
However, overall, those assets were estimated to have fallen $A290 million in value over the past 12 months.
"However, we believe that there is substantial value in B&B's development assets.
Provided the company can navigate safely through the current storm, we argue that there is value to be unlocked," the research stated.
Mr McIntyre understood B&B management intended selling off wind power assets of 3000MW later this year.
Yesterday, The Independent reported Babcock and Brown Power was part of a wider review of company investments, including whether to put its 112MW Glenbrook power station up for sale in a bid to reduce debt.
