B&B Power may face action over Alinta

Babcock & Brown Power could face a class action lawsuit over the alleged failure to properly disclose its refinancing arrangements in the wake of the Alinta acquisition.

A website is calling for expressions of interest in the potential lawsuit from investors who bought BBP shares, options or put options from September 2007 to late August this year.

The website said that during 2007 and early 2008, BBP funding funded growth, including the Alinta acquisition and the purchase of a number of power stations, through a mixture of equity and debt.

"The acquisition strategy occurred concurrently with the tightening of the credit markets in mid-2007," the website said.

"In fact, BBP made acquisitions and investments through to January 2008 despite this tightening.

"During this period and after, BBP continued to state that its gearing ratio was approximately 65%, reaffirmed its distribution guidance, and continued to express confidence in its ability to refinance a debt facility of $3.1 billion."

However, over the period from May to August this year, BBP revealed to the market that it could only refinance $2.7 billion and that it needed $3.4 billion to refinance the Alinta acquisition debt.

As a result of the disclosure, BBP shares dropped over 35 per cent over two days and fell a further 30 per cent after BBP scrapped its 26 cent distribution for 2007/08.

"Finally, upon BBP disclosing a $452 million write down associated with an impairment charge to goodwill (associated with the Alinta purchase) the BBP Security Share Price fell by over 35% on a volume of 36 million," the website said.

The Sydney Morning Herald reported that the action is being run by New York lawyer Julian Hammond, who has been admitted at the NSW and Victorian bars, and has not yet been filed.