Shares of Babcock & Brown tumbled by a record in Sydney trading as the collapse of Lehman Brothers fanned concern that the Australian fund manager won't be able to repay debt.

Babcock dropped 35% to $1.03 in afternoon trading, cutting the firm's market value to $357 million. The stock has tumbled 96% this year after global credit markets seized up, cutting off access to cheap loans to finance acquisitions of ports, power stations and airports, which Babcock bundles into funds it manages.

The company, which sacked its chief executive and sold assets to repay debt, is among Australia's biggest losers from the global credit crisis as investors shun highly geared financial companies.

Lehman, once the fourth-biggest US.investment bank, filed for bankruptcy yesterday after failing to attract a buyer, while Bank of America agreed to buy Merrill Lynch for about $US50 billion ($63 billion).

"Babcock & Brown's plight can only be described as speculative at best,'' Mike Younger, an analyst at Citigroup, said in note to clients today. "The continued downwards spiral in the share price since the first-half result is a function of deteriorating confidence in the company, aided by worsening conditions for global investment banks like Lehman and Merrill,'' wrote Younger, who rates the stock "hold.''

Kelly Hibbins, a spokeswoman for Babcock & Brown, said the company doesn't trade financial debt instruments or have them on its balance sheet, one of the causes of problems at Lehman and Merrill Lynch.

"People assume that we are in the same boat as Lehman and Merrill, but we are not,'' Hibbins said today. "Obviously there are concerns about counterparty risk, but we don't have any exposure to Lehman.''

Babcock, which listed in October 2004, has been the worst-performing stock on the MSCI Asia-Pacific Index this year. Babcock's bankers forced it sell some assets at a loss to reduce debt following the share-price slump.

Bloomberg