Nov. 17 (Bloomberg) -- Babcock & Brown Ltd., the worst performing stock on the MSCI Asia-Pacific Index this year, fell to a record low in Sydney after Wachovia Corp. said it may seize collateral on a $112 million loan.

The 14 percent drop in Babcock shares came even as the company announced the sale of its Enersis wind energy business in Portugal for about 1.15 billion euros ($1.4 billion). Proceeds of A$285.8 million ($182 million) from that sale won't go toward fulfilling an agreement made in June with lenders to repay A$400 million of debt, spokeswoman Erica Borgelt said.

Babcock has lost 64 percent since Nov. 6, when ABN Amro Holding NV analyst John Heagerty said the company may breach loan agreements because the global credit crisis has made selling assets harder. Babcock is competing with distressed sellers to avoid the fate of Allco Finance Group Ltd., the Sydney-based manager of infrastructure funds that was placed in the hands of outside managers this month.

``Babcock's already gone. It's in liquidation mode,'' said Donald Williams, chief investment officer at Platypus Asset Management Ltd. in Sydney, which oversees the equivalent of about $768 million. ``It's at the same point that Allco was six months ago -- with its bankers keeping it going for as long as they can get some of their debt back.''

The shares slumped to 41 Australian cents as at the 4:10 p.m. close of trading after Babcock said it may lose as much as $41 million on its venture with GPT, an Australian real estate investment trust. Charlotte, North Carolina-based Wachovia may liquidate assets put up as security for the loan after the joint venture ignored demands to provide more collateral, according to today's statement.

Wind Sale

Babcock owns properties ranging from industrial and urban projects in Italy to 28,000 apartments in the U.S. Babcock said last year the value of its stake in European and U.S. real estate held in a venture with GPT Group fell by 18 percent to A$6.6 billion.

Babcock in December 2005 bought the Enersis project for 490 million euros and then sold half to affiliate Babcock & Brown Wind Partners. The company plans to sell its remaining stakes in wind assets in Portugal, France, Greece and Germany, it said today. Enersis was bought by investors led by Magnum Capital, which is based in Madrid and Lisbon.

Babcock & Brown Wind Partners said in a separate statement today it will receive net cash proceeds of about A$274 million from the sale of its 50 percent stake, on which it made a loss of A$11.7 million. The sale will cut debt by about A$718 million, Babcock Wind said. The wind fund's shares rose 3.1 percent to 82 Australian cents.

`Extremely Difficult'

Babcock & Brown's fight to avoid becoming Australia's next victim of the credit crisis may depend on convincing bankers that it can sell assets in a market where others have failed. Babcock & Brown Infrastructure Group, one of Babcock's 12 publicly traded funds, said Nov. 5 that divestments are ``extremely difficult.''

Analysts, including Shaw Stockbroking Ltd.'s Scott Marshall and Wise-Owl.com's Tim Morris, say little would be left for shareholders should banks call in their loans.

Allco Finance, which like Babcock piled on debt to buy assets and spin them off to investors when credit was cheap, handed over operations to Tony McGrath and Joseph Hayes of corporate advisory firm McGrathNicol & Partners this month after failing to repay banks on time. So did ABC Learning Centres Ltd., the world's biggest publicly traded childcare provider.

To contact the reporter for this story: Stuart Kelly in Sydney skelly22@bloomberg.net

Last Updated: November 17, 2008 00:25 EST