Babcock & Brown Divestiture Continues

Hoping to make a big splash with its first wind acquisition, private equity player Riverstone Holdings purchased Babcock & Brown's wind development portfolio this week. The new company will be called Pattern Energy.

Although financial terms were not disclosed, Riverstone Holdings is committing $400 million to the deal. An energy-focused private equity firm, Riverstone has about $17 billion under management across six investment funds.

Mike Garland, who formerly headed Babcock & Brown's infrastructure group, will be the new company's CEO. Pattern Energy retains the Babcock & Brown North American energy development team and also maintains the current Babcock & Brown wind development pipeline - which exceeds 4,000 MW of wind power in 11 states and four countries, in addition to several power transmission projects.

Meanwhile, the dismantling continues for Sydney, Australia-based global investment and advisory firm Babcock & Brown, which was founded in 1977. The company will sell all of its assets in the next two to three years, according to a company spokesperson.

At its height, Babcock's global reach was significant. In addition to wind (including a majority controlling stake in offshore wind developer Bluewater Wind), Babcock's assets included real estate and transportation holdings, among others, and the company had more than $80 billion in assets under management. It is best known in financial markets for structured finance deals.

Upon falling victim to the global credit crisis, the company went into voluntary administration in March 2009 after unsecured bond holders voted down a debt-restructuring plan that would value their claims at 0.1 cents on the dollar. The rejection rendered the company insolvent because it could not meet interest payments.

According to Garland, Pattern's first wind project, the 103 MW Hatchet Ridge Wind Farm in northern California, will begin construction in the next few months.

"In the current market, it's very hard to find capital," says Keith Martin, a partner in Washington, D.C., law office of Chadbourne & Parke. "Right now, private equity is a good source of funding for established groups like the wind team at Babcock."