Dec. 4 (Bloomberg) -- Babcock & Brown Ltd., the Australian asset manager struggling to stave off collapse, received a A$150 million ($98 million) loan from its bankers, giving it more time to sell assets and cut costs. The shares doubled in Sydney trade.

The loan, which is due to be repaid at the end of next year, will rank ahead of Babcock's existing corporate loans, the Sydney-based asset manager said in a statement today. Babcock suspended dividends and said it's considering a debt-for-equity swap as it seeks to recapitalize its balance sheet and develop a plan to avert bankruptcy by Jan. 9.

Babcock, which fed on cheap debt to buy property, ports and power stations, is battling to avoid the fate of companies including Allco Finance Group Ltd., the Sydney-based manager of infrastructure funds that imploded last month, as the global credit crisis raises debt costs and cuts asset values.

“Clearly this short-term loan was important for Babcock as a going concern, giving them a better chance of survival,” said Paul Xiradis, who manages the equivalent of $11 billion as chief executive officer of Ausbil Dexia Ltd. in Sydney. “At worst it buys the company a bit of time. At best it gives them at least some hope of working through their issues.”

Babcock shares, down 98 percent this year, doubled in value to 49 Australian cents as at 10:28 a.m. in Sydney. They closed at 25 cents on Nov. 19 when they were suspended from trading amid speculation the company couldn't repay its debts.

Appreciate Support

The new loan is priced at the 30-day bank bill rate plus 6 percent per year, Babcock said. Babcock's financial covenants for its two corporate loans have been suspended as part of the new agreement. The interest on the loans under the new agreement is payable on a “pay as you can” basis, the company said.

Australia's five biggest banks have A$700 million of loans at risk with Babcock; overseas lenders including Royal Bank of Scotland Plc have almost A$2 billion on the line, according to estimates by UBS AG. Babcock had interest-bearing debt of A$9.6 billion as of Aug. 21, almost four times shareholders' equity.

“We appreciate the support of our banking syndicate who have moved quickly to provide measures to address some of the immediate funding requirements within the business and provide a structure for ongoing discussions around the long-term positioning of the business,” Chief Executive Officer Michael Larkin said in the statement.

Babcock flagged a plan to recapitalize the company, including swapping debt for equity, by April next year. It will also agree on a revised business plan, including new financial covenants, with its syndicate of 25 bankers by Jan. 9.

Babcock resolved a dispute with one of its bankers, which seized a deposit last month, it said without providing more details. German lender Bayerische Hypo- und Vereinsbank AG seized an account with A$140 million on Nov. 19, according to the Australian Financial Review.

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

Last Updated: December 3, 2008 18:33 EST