Babcock & Brown Ltd. Chief Executive Officer Phil Green is under increasing pressure to sell European wind farms to stave off a possible debt review, triggered by a share collapse this week.

The sale of the Sydney-based asset manager's wind power assets, including the Enersis business in Portugal, could bring as much as A$2.5 billion ($2.3 billion), said analyst Kieren Chidgey at Merrill Lynch & Co. Babcock's shares have tumbled 53 percent this week, slicing its market value to A$1.75 billion on concern over debt at the company and one of its funds.

A successful sale could trigger a rebound in Babcock's shares, which trade at less than three times earnings after falling 83 percent this year, said ABN Amro Holdings NV analyst John Heagerty. Failure may increase the risk of banks demanding early repayment on A$2.8 billion of debt.

"If they can get the sale under way at anywhere close to a fair price, then that will rejuvenate a lot of fresh confidence from investors,'' said Sean Fenton, who manages the equivalent of $700 million at Tribeca Investment Partners in Sydney. "If not, then I'm afraid its bankers will start asking some serious questions.''

Babcock shares dropped 24 percent to A$5.25 at the close in Sydney, extending yesterday's 28 percent rout. The firm sold shares at A$5 in an initial public offering in October 2004.

Business as Usual

Should Babcock's market value remain below A$2.5 billion at the end of a four-month review period, banks would have the right to force the company to pay back debt early or sell assets. During the review period, Babcock must also get permission from creditors to pay out dividends.

The company yesterday said the stock drop was driven by short-sellers and that its operations are running as usual. Today, Babcock announced an agreement to buy Royal Bank of Scotland Group Plc's train-leasing unit for 3.6 billion pounds ($7 billion) together with a group of investors.

Babcock, founded in 1977, buys infrastructure assets which it bundles into private and listed funds and manages for a fee.

Babcock and the investment funds it manages have combined debt of more than A$46 billion, according to Credit Suisse Group analyst James Ellis. Babcock itself had A$11.4 billion of debt on its own balance sheet at Dec. 31, almost five times its equity, Bloomberg data shows. The company's debt amounted to 77 percent of assets at the end of 2007, more than double the ratio four years earlier.

Confidence `Crisis'

The implosion of Babcock's market value to below A$2.5 billion unleashed what UBS AG analyst Jonathan Mott called a "crisis of confidence'' among investors. Merrill's Chidgey termed it a "further hit to management's already fragile credibility.''

Green, 53, wasn't available for comment, Babcock spokeswoman Erica Borgelt said today. Green owns 12.8 million shares in the company, equivalent to a 3.8 percent stake.

Babcock & Brown Wind Partners, which owns wind farms in Asia, the U.S. and Europe, spent A$1.78 billion on acquisitions and new projects in last year's second half, boosting generation capacity about 67 percent.

Babcock Wind said in February it's the world's fifth-biggest wind energy company in terms of installed capacity. Its parent Babcock in December 2005 bought Enersis in Portugal for 490 million euros ($756 million) before selling half of it to the wind fund.

"We believe there is substantial value in Babcock's development assets, so provided the company can navigate safely through the current storm, we argue that there is value to be unlocked,'' ABN's Heagerty said in a note dated yesterday. "This should be a catalyst to lift Babcock's share price.''

Funds Struggle

Compounding Green's woes, shares in Babcock's listed funds have plummeted, sparking concern that the company will have to write down assets.

Babcock & Brown Infrastructure Group fell 12 percent today, bringing declines this week to 31 percent.

Babcock & Brown Power, scheduled to complete a A$2.7 billion debt refinancing next week, fell 21 percent amid investor concern it may have to sell its best asset to bolster funds. The company needs to raise a further A$635 million in debt to cover a loan and capital expenditure through mid-2009, Credit Suisse said today in a report.

The likelihood of Babcock providing the A$360 million funding needed to refinance the loan "is looking increasingly unlikely given issues at the parent company level,'' Credit Suisse analysts led by Sandra McCullagh said.

Babcock & Brown managed A$72 billion in assets as of March 31, a 64 percent increase from a year earlier. It has A$5 billion to invest in assets for its funds over the next two years.